Order-09032015-115 of 2014

Before the
MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400 005
Email: mercindia@merc.gov.in
Website: www.mercindia.org.in/ www.merc.gov.in
Case No. 115 of 2014
In the matter of
Petition of Vidarbha Industries Power Ltd. for determination of Capital Cost and Final
Tariff for FY 2014-15 and FY 2015-2016 for its Generating Station at Butibori, Distt.
Nagpur
Smt Chandra Iyengar, Chairperson
Shri. Azeez M. Khan, Member
Shri. Deepak Lad, Member
ORDER
Date: 09 March, 2015
M/s. Vidarbha Industries Power Limited (VIPL) filed a Petition on 30 May, 2014 for
approval of capital cost and final Tariff of its 2 x 300 MW generating station located at the
Maharashtra Industrial Development Corporation (MIDC)s Butibori Industrial Area, Distt.
Nagpur, in the second Control Period of the Multi Year Tariff (MYT), i.e. FY 2014-15 and
FY 2015-16. The Petition has been filed under the provisions of Section 61, 62, and 86(1) (a)
and (b) of the Electricity Act (EA), 2003 and as per Parts A to C, E, F and K of the MERC
(MYT) Regulations, 2011. The Commission, in exercise of the powers vested in it under
Sections 61 and 62 of EA, 2003 and all other powers enabling it in this behalf, and after
taking into consideration the submissions of VIPL, issues raised during the Public Hearing
and all other relevant material, approves the capital cost and determines the final Tariff for
VIPLs 2 x 300 MW generating station at Butibori for FY 2014-15 and FY 2015-16 as
follows.
MERC Order Case No. 115 of 2014
Page 1 of 99
TABLE OF CONTENTS
1.
2.
BACKGROUND .............................................................................................................. 9
1.1.
BACKGROUND OF THE CASE ....................................................................................... 9
1.2.
ADMISSION OF THE PETITION AND PUBLIC PROCESS ................................................. 10
1.3.
ORGANISATION OF THE ORDER ................................................................................. 11
PUBLIC HEARING ...................................................................................................... 12

2.1.
PUBLIC HEARING AND SUGGESTIONS/OBJECTIONS FROM THE PUBLIC/STAKEHOLDERS

12
3.
4.
APPROVAL OF CAPITAL COST .............................................................................. 13

3.1.
PROJECT COMMISSIONING AND TIME-LINES.............................................................. 13
3.2.
SUBMISSION OF VIPL ON CAPITAL COST .................................................................. 29
3.3.
LAND ........................................................................................................................ 34
3.4.
EPC CONTRACT ........................................................................................................ 35
3.5.
INITIAL SPARES AS PART OF THE CAPITAL COST AS ON COD .................................... 39
3.6.
OUTSIDE BOUNDARY LIMITS (OSBL) ....................................................................... 40
3.7.
OVERHEADS .............................................................................................................. 40
3.8.
INTEREST DURING CONSTRUCTION (IDC) ................................................................. 44
3.9.
FOREIGN EXCHANGE RATE VARIATION .................................................................... 48
3.10.
APPROVED CAPITAL COST ........................................................................................ 50
3.11.
MEANS OF FINANCE .................................................................................................. 51
DETERMINATION OF TARIFF FOR FY 2014-15 AND 2015-16 .......................... 53

4.1.
CAPITAL COST FOR DETERMINATION OF TARIFF ........................................................ 53
4.2.
ADDITIONAL CAPITALISATION .................................................................................. 55
4.3.
DEPRECIATION .......................................................................................................... 59
4.4.
INTEREST ON LONG TERM LOAN ............................................................................... 61
4.5.
RETURN ON EQUITY .................................................................................................. 66
4.6.
INCOME TAX ............................................................................................................. 69
4.7.
OPERATION AND MAINTENANCE (O&M) EXPENSES ................................................. 71
4.8.
NON- TARIFF INCOME................................................................................................ 73
Page 2 of 99
5.
4.9.
INTEREST ON WORKING CAPITAL ............................................................................. 73
4.10.
ANNUAL FIXED CHARGES ......................................................................................... 75
4.11.
FUEL SUPPLY AGREEMENT ....................................................................................... 77
4.12.
CALORIFIC VALUE AND PRICE OF FUEL .................................................................... 79
4.13.
OPERATIONAL PARAMETERS..................................................................................... 81
4.14.
ENERGY CHARGES .................................................................................................... 87
4.15.
SUMMARY OF TARIFF ................................................................................................ 89
COMPLIANCE OF DIRECTIVES ............................................................................. 90

5.1.
RISK OF FERV .......................................................................................................... 90
5.2.
FUEL SUPPLY AGREEMENT ....................................................................................... 90
5.3.
PERFORMANCE GUARANTEE TEST ............................................................................ 91
5.4.
AUXILIARY CONSUMPTION ....................................................................................... 91
6.
APPLICABILITY OF ORDER AND TARIFF .......................................................... 93
7.
RULINGS OF THE COMMISSION ........................................................................... 94
APPENDIX-I .......................................................................................................................... 98
APPENDIX-II ........................................................................................................................ 99
Page 3 of 99
LIST OF TABLES
TABLE 1 - PROJECT TIME-LINES AND SCHEDULE AS SUBMITTED BY VIPL ................................. 13
TABLE 2 - CHRONOLOGY OF EVENTS FOR RAILWAY LAND LICENSING FOR SIDING ................... 15
TABLE 3 - CHRONOLOGY OF EVENTS REGARDING SICOM LAND FOR RAILWAY SIDING ........... 16
TABLE 4 - SCHEDULE OF KEY MILESTONES, AS SUBMITTED BY VIPL ........................................ 20
TABLE 5 - PROJECT COST HAD COD BEEN AS PER MYT NORMS, AS SUBMITTED BY VIPL (RS.
CRORE) .............................................................................................................................. 27
TABLE 6 - UNIT-WISE ACTUAL PROJECT COST AS ON COD, AS SUBMITTED BY VIPL (RS.

CRORE) .............................................................................................................................. 28
TABLE 7 - PROJECT COST AS ON COD, AS SUBMITTED BY VIPL (RS. CRORE)........................... 29

TABLE 8 - ADDITIONAL FEATURES OF THE PLANT, AS SUBMITTED BY VIPL.............................. 30
TABLE 9 - COST OF LAND, AS SUBMITTED BY VIPL .................................................................. 34
TABLE 10 - DETAILS OF COST OF MIDC LAND, AS SUBMITTED BY VIPL ................................. 35
TABLE 11 - BTG AND BOP COST, AS SUBMITTED BY VIPL (RS. CRORE) ................................. 36
TABLE 12 - BENCHMARKING OF CAPITAL COST, AS SUBMITTED BY VIPL ................................ 37
TABLE 13 - BENCHMARKING OF PER MW COST, AS SUBMITTED BY VIPL ................................. 38
TABLE 14 - DETAILS OF OVERHEADS, AS SUBMITTED BY VIPL ................................................ 41
TABLE 15 OVERHEAD COST APPROVED BY THE COMMISSION (RS. CRORE) ........................... 44
TABLE 16 - DETAILS OF IDC AND FINANCING CHARGES AS SUBMITTED BY VIPL (RS. CRORE) 46
TABLE 17 - IDC AND FINANCING CHARGES, AS SUBMITTED BY VIPL ....................................... 47
TABLE 18 - IDC APPROVED BY THE COMMISSION (RS. CRORE) ................................................ 47
TABLE 19 - DETAILS OF FERV, AS SUBMITTED BY VIPL .......................................................... 48
TABLE 20 - FERV APPROVED BY THE COMMISSION (RS. CRORE) ............................................. 50
TABLE 21 - CAPITAL COST APPROVED BY THE COMMISSION (RS. CRORE) ................................ 50
TABLE 22 - MEANS OF FINANCE AS APPROVED BY THE COMMISSION (RS. CRORE) ................... 52
TABLE 23 - CAPITAL COST FOR DETERMINATION OF TARIFF, AS SUBMITTED BY VIPL .............. 53
TABLE 24 - CAPITAL COST FOR DETERMINATION OF TARIFF APPROVED BY THE COMMISSION (RS.
CRORE) ............................................................................................................................. 55
TABLE 25 - ADDITIONAL CAPITALISATION, AS SUBMITTED BY VIPL (RS. CRORE) ................... 55
TABLE 26 - ADDITIONAL CAPITALISATION, AS SUBMITTED BY VIPL (RS. CRORE) ................... 56
TABLE 27 - DETAILS OF RAILWAY SIDING COST, AS SUBMITTED BY VIPL (RS. CRORE) ........... 57
TABLE 28 - ADDITIONAL CAPITALISATION AS APPROVED BY THE COMMISSION ....................... 59
Page 4 of 99
TABLE 29 DEPRECIATION, AS SUBMITTED BY VIPL (RS. CRORE) .......................................... 60

TABLE 30 - DEPRECIATION AS APPROVED BY THE COMMISSION (RS. CRORE)........................... 61
TABLE 31 - COMPUTATION OF INTEREST RATE, AS SUBMITTED BY VIPL ................................. 61
TABLE 32 - INTEREST EXPENSES, AS SUBMITTED BY VIPL (RS. CRORE) ................................... 62
TABLE 33 - SCENARIOS FOR HEDGING COST, AS SUBMITTED BY VIPL (RS. CRORE).................. 62
TABLE 34 - IMPACT OF HEDGING ON ARR HEADS, AS SUBMITTED BY VIPL (RS. CRORE) ......... 64
TABLE 35 - INTEREST EXPENSES AS APPROVED BY THE COMMISSION (RS. CRORE)................... 66
TABLE 36 - RETURN ON EQUITY, AS SUBMITTED BY VIPL (RS. CRORE) ................................... 67
TABLE 37 - TIME SCHEDULE FOR COMMISSIONING COMPUTED BY THE COMMISSION ................ 68
TABLE 38 RETURN ON EQUITY APPROVED BY COMMISSION (RS. CRORE)................................. 69
TABLE 39 - INCOME TAX AS SUBMITTED BY VIPL (RS. CRORE) ............................................... 70
TABLE 40 - O&M EXPENSES AS SUBMITTED BY VIPL .............................................................. 72
TABLE 41 - O&M EXPENSES AS APPROVED BY THE COMMISSION (RS. CRORE) ........................ 73
TABLE 42 - INTEREST ON WORKING CAPITAL, AS SUBMITTED BY VIPL (RS. CRORE)............... 73
TABLE 43 - INTEREST ON WORKING CAPITAL AS APPROVED BY THE COMMISSION (RS. CRORE)
.......................................................................................................................................... 75
TABLE 44 - ANNUAL FIXED COST AS SUBMITTED BY VIPL (RS. CRORE) .................................. 75
TABLE 45 - ANNUAL FIXED CHARGES AS APPROVED BY THE COMMISSION (RS. CRORE).......... 76
TABLE 46 - CALORIFIC VALUE AND PRICE OF FUEL, AS SUBMITTED BY VIPL .......................... 80
TABLE 47 - CALORIFIC VALUE AND PRICE OF FUEL CONSIDERED BY THE COMMISSION ........... 81
TABLE 48 - OPERATIONAL PARAMETERS, AS SUBMITTED BY VIPL........................................... 81
TABLE 49 - OPERATIONAL PARAMETERS FOR UNIT 1 FROM COD TILL FY 2013-14 ................. 84
TABLE 50 - STATION HEAT RATE ALLOWED BY THE COMMISSION............................................ 85
TABLE 51 OPERATIONAL PARAMETERS APPROVED BY THE COMMISSION ................................. 86
TABLE 52 - ANNUAL ENERGY CHARGES, AS SUBMITTED BY VIPL (RS. CRORE) ...................... 87
TABLE 53 - FUEL COST AS APPROVED BY THE COMMISSION (RS. CRORE) ................................ 87
TABLE 54 COST OF WATER AS SUBMITTED BY VIPL (RS. CRORE)............................................ 87
TABLE 55 - ENERGY CHARGES AS APPROVED BY THE COMMISSION .......................................... 88
TABLE 56 - TARIFF APPROVED BY THE COMMISSION FOR FY 2014-15 AND FY 2015-16 .......... 89
Page 5 of 99
List of Abbreviations
ACQ
ACW
AFC
AHP
ARR
AS
ATE
BC
Annual Contracted Quantity

Auxiliary Cooling Water
Annual Fixed Charges
Ash Handling Plant
Aggregate Revenue Requirement
Accounting Standards
Appellate Tribunal for Electricity
Buyers Credit
BoP
BFP
BTG
CA
CAPEX/Capex
CCEA
CCI
CEA
CERC
Balance of Plant
Boiler Feed Pump
Boiler Turbine Generator
Chartered Accountant
Capital Expenditure
Cabinet Committee on Economic Affairs
Competition Commission of India
Central Electricity Authority
Central Electricity Regulatory Commission
CFBC
CHP
CIL
COC
COD
CW
CWIP
DCS
DM
Circulating Fluidised Bed Circulation

Coal Handling Plant
Coal India Limited
Cycles of Concentration
Commercial Date of Operation
Cooling Water
Capital Work In Progress
Digital Control System
De-mineralisation
EAC
ECB
EPC
ERP
ESP
FBSM
FERV
FO
FSA
Expert Advisory Committee

External Commercial Borrowings
Engineering, Procurement and Construction
Enterprise Resource Planning
Engineering Scale Plan
Final Balancing and Settlement Mechanism
Foreign Exchange Rate Variation
Furnace Oil
Fuel Supply Agreement
Page 6 of 99
FY
GCPP
GCV
GFA
GoM
ICAI
IDC
IPP
Kcal
Kcal/kWh
Financial Year
Group Captive Power Project
Gross Calorific Value
Gross Fixed Assets
Government of Maharashtra
Institute of Chartered Accountants of India
Interest During Construction
Independent Power Producer
kilo calories
kilo calories per kilowatt hour
Kg
kV
KW
kWh
Kilogram
kilo Volt
kilo Watt
Kilo Watt hour
LoA
LD
LDO
LIBOR
Letter of Assurance
Liquidated Damages
Light Diesel Oil
London Interbank Offered Rate
MAT
MERC
MIDC
MLD
MMT
MMTPA
MoC
MoEF
MoP
Minimum Alternate Tax

Maharashtra Electricity Regulatory Commission
Maharashtra Industrial Development Corporation
Million Litres per Day
Million Metric Tonnes
Million Metric Tonnes per Annum
Ministry of Coal
Ministry of Environment and Forests
Ministry of Power
MoPNG
MPCB
MSPGCL
MSLDC/SLDC
Ministry of Petroleum and Natural Gas

Maharashtra Pollution Control Board
Maharashtra State Power Generation Company Ltd.
Maharashtra State Load Despatch Centre
MT
MU
Metric Tonnes
Million Units
MW
MYT
Megawatt
Multi Year Tariff
NA
Non-Agriculture
NTP
Notice to Proceed
Page 7 of 99
NTI
Non Tariff Income
NOC
OEM
OSBL
O&M
P&L
PLF
PPA
P&G Test
No Objection Certificate
Original Equipment Manufacturer
Outside Boundary Limits
Operation & Maintenance
Profit and Loss account
Plant Load Factor
Power Purchase Agreement
Performance & Guarantee Test
PPM
RBI
RCC
RH
RHT
RInfra-D
RO
RoE
RPL
Parts per million

Reserve Bank of India
Roller Compacted Concrete
Relative Humidity
Re-Heat Temperature
Reliance Infrastructure Limited-Mumbai Distribution
Reverse Osmosis
Return on Equity
Reliance Power Limited
SBAR
SECL
SFOC
SHR
SHT
SICOM
SLC(LT)
TMCR
TVS
State Bank Advance Rate

South Eastern Coalfields Limited
Secondary Fuel Oil Consumption
Station Heat Rate
Super Heat Temperature
State Industrial & Investment Corporation Of Maharashtra
Standing Linkage Committee (Long Term)
Turbine Maximum Continuous Rating
Technical Validation Session
USD
VAM
VAT
WCL
United States Dollar

Vapour Absorption Machine
Value Added Tax
Western Coalfields Limited
Page 8 of 99
1.
BACKGROUND
1.1.
Background of the Case
1.1.1.
VIPL is a Generating Company which has developed a 600 MW (2 x 300 MW)

Power Plant at MIDC Butibori, District Nagpur in Maharashtra. The power from the
generating station is being supplied to Reliance Infrastructure Ltd. (Distribution
Business) (RInfra-D), which is a Distribution Licensee in parts of Mumbai.
1.1.2.
VIPL has submitted that the Commission, vide Order dated 20 February, 2013 in
Case No. 2 of 2013 and Order dated 19 July, 2013 in Case No. 76 of 2013, had
accorded in-principle approval to the Power Purchase Agreement (PPA) between
RInfra-D and VIPL for procurement of power from the latters generating Unit 2 and
Unit 1 respectively on long term basis, and the Consolidation Agreement dated 4
June, 2013 executed between RInfra-D and VIPL for supply under the two PPAs for
Unit 1 and Unit 2 to be treated as supply from the Power Plant as a whole for Tariff
and regulatory purposes.
1.1.3.
Vide Order dated 17 January, 2014 in Case No. 91 of 2013, the Commission had
approved the provisional Tariff for FY 2014-15 and FY 2015-16, and directed VIPL
to submit the capital cost based on audited accounts post the date of Commercial
Operation (COD).
1.1.4.
VIPL has filed the present Petition for approval of capital cost and final Tariff for its
600 MW (2 x 300 MW) generation station at Butibori for the Second MYT Control
period FY 2014-15 and FY 2015-16 under the provisions of the MERC MYT
Regulations, 2011.
1.1.5.
VIPLs prayers are as under:
(a) Admit the present Petition;

(b) Approve the capital cost and final tariff of the station for FY 2014-15 and FY
2015-16 based on the rationale submitted by VIPL.
Page 9 of 99
(c) Approve the performance parameters as submitted in this petition.

(d) Provide directives on the identified options for treatment of FERV/hedging.
(e) Condone any shortcomings in the petition and allow the Petitioner to submit
additional information as may be required by the Commission at a later stage;
(f) Allow VIPL to recover the difference in current tariff /provisional tariff vis-vis the final tariff to be approved in this petition from the date of issue of order.
(g)Pass any such order as deemed appropriate in the circumstance of this case.
1.2.
1.2.1.
Admission of the Petition and Public Process

Technical Validation Session: Vide Notice dated 11 June, 2014, the Commission
scheduled a Technical Validation Session (TVS) on the Petition on 19 June, 2014 in
the presence of institutional Consumer Representatives authorised under Section
94(3) of the EA, 2003. During the TVS held on 19 June, 2014, VIPL made a
presentation focusing on the salient features of the Petition. The list of persons who
participated in the TVS is at Appendix-I.
1.2.2.
Admission of the Petition: The Commission admitted the Petition on 13 October,

2014. In accordance with Section 64 of the EA, 2003, VIPL was directed to publish a
Notice to solicit suggestions and objections from the public. In accordance with
Regulation 90 of the MERC (Conduct of Business) Regulations, 2004, the
Commission also directed VIPL to publish the Notice in at least two local Marathi
and English daily newspapers with wide circulation in Maharashtra, and to reply
expeditiously to all the suggestions and objections received.
1.2.3.
Public Notice: VIPL published the Notice on 3 November, 2014 in two English
newspapers, viz. Indian Express and Hindustan Times, and two Marathi newspapers,
viz. Loksatta and Samana, inviting suggestions and objections. Copies of the Petition
and its summary were made available at the Companys offices for inspection/
purchase, and also on VIPLs website www.reliancepower.co.in. A copy of the
Public Notice and the executive summary of the Petition were also made available on
the website of the Commission (www.mercindia.org.in / www.merc.gov.in) in a
downloadable format.
Page 10 of 99
1.2.4.
Public Hearing: The Public Hearing on the Petition was held on 9 December, 2014
at the office of the Commission at World Trade Centre, Centre No.1, 13th Floor,
Cuffe Parade, Mumbai. The list of objectors, responders and other persons who
participated in the Hearing is at Appendix II. The due process contemplated under
law was followed by the Commission at every stage to ensure transparency and
public participation and to provide adequate opportunity to all those who wanted to
express their opinion in this matter.
1.3.
1.3.1.
Organisation of the Order

This Order is organised in the following Sections:
Section 1 provides a brief history of the quasi-judicial regulatory process

undertaken by the Commission.
Section 2 discusses the suggestions raised by the stakeholders/public in writing as

well as during the Public Hearing before the Commission.
Section 3 deals with the approval of capital cost of VIPLs Butibori generating
station.
Section 4 deals with the determination of final Tariff of the generating station for
FY 2014-15 and FY 2015-16.
Section 5 deals with the compliance of directives contained in the provisional

Tariff Orders of the Commission
Section 6 deals with the applicability of the Order.
Section 7 sets out the Rulings of the Commission.
Page 11 of 99
2.
PUBLIC HEARING
2.1.
Public Hearing and suggestions/objections from the public/stakeholders
2.1.1.
Neither the Commission nor VIPL received any suggestions/objections from

stakeholders or other members of the public on the Petition.
2.1.2.
The Public Hearing was held on 9 December, 2014, at the start of which VIPL made
a brief presentation.
2.1.3.
During the hearing, the Commission inquired if any members of the

public/stakeholders wished to make any suggestions/comments on the Petition.
However, no suggestions/objections/comments were made by any of those present.
2.1.4.
The list of persons who participated in the Public Hearing is at Appendix-II.
Page 12 of 99
3.
APPROVAL OF CAPITAL COST
3.1.
Project Commissioning and Time-lines
3.1.1.
VIPL is a Special Purpose Vehicle (SPV) originally established for implementation

of a Group Captive Power Project (GCPP) through a Competitive Bidding Process
conducted by the MIDC.
3.1.2.
Vide its Order dated 20 February, 2013 in Case No. 2 of 2013, the Commission
accorded in-principle approval to the PPA between VIPL and RInfra-D for supply of
300 MW from Unit 2. Vide Order dated 19 July, 2013 in Case No. 76 of 2013, it
accorded in-principle approval to the PPA between VIPL and RInfra-D for supply of
300 MW from Unit 1.
3.1.3.
VIPL submitted that it had awarded three separate Engineering, Procurement &
Construction (EPC) contracts to RInfra for Unit 1, Unit 2 and Railway siding works.
3.1.4.
VIPL further submitted that Unit 1 has achieved COD on 4 April, 2013 and Unit 2 on
28 March, 2014.
Commissions Analysis
3.1.5.
Based on the Project zero date as submitted by VIPL, the time overrun considering
the scheduled COD of Units I & II vis--vis their actual COD are as under:
Table 1 - Project time-lines and schedule as submitted by VIPL
Particulars Start Date

Unit 1
Unit 2
3.1.6.
Scheduled
COD
27.02.2010 27.09.2012
30.4.2010 31.01.2013
Actual Full
Load Test
17.08.2012
19.03.2013
Actual
COD
4.04.2013
28.03.2014
Time Overrun
189 days
421days
The Commission asked VIPL to explain the reasons for the delay in COD. In reply,
VIPL has cited two major reasons:
Page 13 of 99
(i)
Non-availability of land from SICOM and Railways In order to complete

the railway siding, a few pockets of land were required to be procured from
the State Industrial & Investment Corporation of Maharashtra (SICOM) and
Central Railways (CR). In case of SICOM land, an application for transfer of
the identified land to VIPL was made in January, 2009. Based on the demand
note given by SICOM, VIPL paid 50% advance amount in May 2011.
However, for the final transfer of land, SICOM was required to take
clearance from the Industries, Revenue, Law and Judiciary Departments of
Govt. of Maharashtra (GoM), and these clearances have taken more time than
could be anticipated.
In case of Railway land, similar application for transfer was made to Central
Railways in August, 2010. The detailed Engineering Scale Plan (ESP) was
approved by the relevant authorities in June, 2011 enabling the further
Railway Land Licensing approval process. Railway Land Licensing has been
completed in January, 2014.
VIPL added that it has made significant efforts to speed up the process of
clearances and followed up with more than forty letters.
(ii)
Delay in execution of Fuel Supply Agreement (FSA) VIPL submitted that

Unit 1 was demonstrated by achievement of full load operation on 17 August,
2012, but its COD was delayed on account of non-availability of Carpet Coal
required for commissioning purposes from Western Coalfields Limited
(WCL). Despite the Central Electricity Authority (CEA)s recommendation
and valid Letter of Assurance (LoA) approved by the Standing Linkage
Committee - Long Term (SLC (LT)), WCL did not supply it in time. VIPL
has followed up with more than 90 letters.
3.1.7.
VIPL has submitted the following chronology of events with regard to Railway Land
Licensing for the Railway siding:
Page 14 of 99
Table 2 - Chronology of events for Railway Land Licensing for siding

Sr. Activity
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Date
Application to railways for land licensing

CR, Nagpur after verification forwarded the plan to Chief
Engineer (CE(G)), CR, Mumbai
Engineering Scale Plan (ESP) approved by Railways
CR (Finance Department) forwarded the land proposal to
CE(G), CR Mumbai
CE(G), CR Mumbai raised queries to Sr. DEN (Co.) CR
Nagpur
DEN(HQ) forwarded their reply to CE(G), Mumbai
CE(G), CR Mumbai sent file back to Nagpur with observation
that land licensing has to be done from (-) 800 chainage while
Nagpur Division has approved +95 chainage
Dy. CE incorporated the additional area and forwarded file to
CE(G), CR, Mumbai
Follow up letter from VIPL to GM, CR for land licensing
VIPL to Sr DOM, CR, Nagpur for alteration of ESP
New Railway Board Circular No. 99/TC (FM)/26/1/Pt-II
dated 30 January, 2012 in connection with railway siding. The
relevant clause is No licence fees will be charged on the
common user traffic facilities at the station from the siding
owner.
VIPL to Chief Transportation Planning Manager, CR,
Mumbai modification in approved ESP
RCC (Consultant of VIPL) to DEN (HQ) CR, Nagpur
Revision of proposal due to change in Railways rules and
requesting to send old land licensing drawing to make
necessary corrections
CE(G), CR, Mumbai sent drawing back to Nagpur division
for required alterations in line with New Railway Board
Circular
VIPL to GM, CR follow up letter
01-Aug-10
23-Feb-11
Dy. CE to Sr. DEN/CO, Nagpur Communication to obtain

requisite documents from VIPL
The documents required are;
1) Undertaking that party shall bear the cost of yard
remodeling and cost of additional land
2) Undertaking by competent authority to enter into financial
commitment
VIPL to CE (Genl.) Regarding bearing additional charges of
land
20-Nov-12
04-Jun-11
14-Jun-11
07-Jul-11
26-Aug-11
30-Sep-11
05-Dec-11
23-Dec-11
26-Dec-11
30-Jan-12
02-Feb-12
21-Feb-12
01-Mar-12
07-Mar-12
27-Nov-12
Page 15 of 99
Sr. Activity
No.
18
VIPL to Sr. DEN Acceptance of land licence fees and

requesting to process the case to PHOD Committee and GM's
approval
VIPL to CIPM, CR, Mumbai Acceptance of following
additional clause in land licensing agreement
In future railway is authorised to take out more routes from
the VIPL siding for other siding.
VIPL to CIPM, CR, Mumbai Informing about the
construction facilities as per ESP
File put up for approval before PHOD Committee
20-Dec-12
22
VIPL to CIPM, CR, Mumbai Follow up letter with for

expediting land licensing as plant is already operational
11-Jun-13
23
File approved by PHOD Committee
24
Meeting of VIPL with General Manager, CR regarding the

proposal. It was decided to verify the feasibility of reducing
the usage of railway land at site.
VIPL to CIPM, CR, Mumbai Informing about the feasibility
reducing railway land requirement
20-Sep-13
VIPL to CIPM, CR, Mumbai Follow up letter for approval

of land licensing
Final Land licensing approval by CR
21-Nov-13
19
20
21
25
26
27
3.1.8.
Date
25-Feb-13
25-Feb-13
Apr-13
Sep-13
11-Oct-13
01-Jan-14
VIPL has submitted the following chronology of events for approval of SICOM land
for Railway siding:
Table 3 - Chronology of events regarding SICOM land for Railway siding
Sr. Activity
No.
1. Application to SICOM for purchase of land for Railway
siding
2. VIPLs email to SICOM for requesting for encumbrance free
possession of land at Rs. 8 lakh per acre
3. SICOMs email to VIPL- Informing final offer of Rs. 11 Lakh
per acre and other charges payable
4. Meeting between SICOM and VIPL on finalisation of way
forward
5. VIPL to SICOM - A note has been sent for applying to
Industries Department
Date
16-Jan-09
15-Dec-09
16-Dec-09
07-Jun-10
16-Jun-10
Page 16 of 99
Sr. Activity
No.
6. SICOM applied to Industries Deptt. (GoM) for NOC
02-Jul-10
7.
06-Sep-10
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
NOC from Industries Deptt. GoM. Further, Industries Deptt.

GoM suggested that approval of Revenue Department, GoM
also be taken for sale of land
VIPL made an application for additional land of 450 acre in
addition to 47 acres applied earlier
Meeting between SICOM and VIPL regarding commitment
letter for purchase of land
Commitment letter to SICOM for purchase of encumbrance
free land of :
a) 47 acres @ Rs. 11 Lakh per acre and 3% to SICOM Realty
Pvt. Ltd.
b) 453 acres @ 9.6 Lakh per acre including Rs. 1.6 Lakh per
acre to SICOM Realty Pvt. Ltd.
SICOM demand for 50% advance payment
VIPL acceptance letter to demand of advance
SICOM letter to Principal Secretary, Industries Deptt.
requesting assistance in getting NOC from Revenue Deptt.
SICOM invoices for payment of 50% advance for 47 acre and
453 acre of land
Payment of professional fees to SICOM (Rs. 3.7 Crore)
(credited on 15 July, 2011)
VIPL letter to SICOM requesting to allow start of site
enabling work
SICOM letter to request Revenue Deptt. GoM for permission
for outright sale of 47 acres of land
Account statement for payment of 50% advance to SICOM
SICOM letter to Collector, Wardha for non attachment of
assets and setting aside levy of NA tax on SICOM
20. Petition filed by SICOM against Collector of Wardha

regarding recovery of charges
21. Collector, Wardha letter to Pr. Secretary (Revenue) informing
about the encumbrances on SICOM land requested by VIPL
on conditions :
1) Pending dues (Non Agriculture (NA) Tax assessment of
Rs. 1.01 Crore) may be either be deposited or waived by GoM
2) High Court Order in Appeal No. 248/04 filed against Court
order by SICOM regarding additional compensation shall be
binding on SICOM
22. SICOM to Minister, Revenue for his intervention
23. VIPL letter to Revenue Minister for his intervention
24. High Level Committee called by Revenue Deptt. for fast
tracking the case. VIPL, Revenue, and Law & Judiciary
Deptts. were present. High Level Committee recommends
Date
21-Sep-10
16-Feb-11
12-Mar-11
30-Mar-11
31-Mar-11
12-May-11
19-May-11
19-May-11
11-Jun-11
16-Jun-11
15-Jul-11
10-Oct-11
17-Dec-11
22-Dec-11
23-Jan-12
03-Sep-12
29-Oct-12
Page 17 of 99
Sr. Activity
No.
that:
1) Revenue Deptt. shall make available all relevant documents
and terms and conditions applicable while handing over the
land to SICOM to Law & Judiciary Deptt.
2) Law & Judiciary Deptt. to give opinion on whether the
SICOM can sell the land, which was handed over to it by
Government, to VIPL without their permission.
3) Law & Judiciary Deptt. to give opinion on whether the land
handed over to SICOM can be further handed over to MIDC
with due compensation to SICOM for future use/purpose
25. VIPL to SICOM- follow up letter
26. File forwarded to Revenue Department from Law & Judiciary
Department after giving legal opinion (no documentary
evidence provided)
27. SICOM to VIPL - Proposal sent for consent for grant of land
on long term lease
28. VIPL to SICOM- follow up letter including chronology of
communications from the beginning
29. VIPL to SICOM- Confirmation of land lease instead of
outright sale
30. SICOM to Collector, Wardha informing the status of 24 cases
for enhanced compensation with no pending case in respect of
enhanced compensation in the High Court
31. SICOM to Collector, Wardha requesting removal of
encumbrances on SICOM land
32. VIPL to Minister, Revenue for his intervention as land is not
handed over yet
33. Collector, Wardha to Revenue Department-Status report of
land sought by VIPL
34. VIPL to SICOM- Seeking intervention for getting approval
from Revenue/Finance Department
35. VIPL to SICOM- Informing about starting of power plant
without railway siding and requesting for execution of lease
deed
36. Final approval by GoM for transfer of land on lease to extent
of 46.73 acres for 30 years
37. Collector, Wardha to VIPL-Approval of lease and directing to
deposit Rs. 84.65 Lakh pertaining to enhanced compensation
38. Collector, Wardha to Revenue Deptt. - Suggesting changes in
lease agreement, i.e. that the matter is pending before the
Hon'ble High Court for 18.29 acre land and the responsibility
for complying with the High Court Order for the said land
will lie with VIPL.
39. Lease deed signed
Date
06-Mar-13
May-13
05-Jun-13
06-Jun-13
19-Jun-13
03-Sep-13
03-Sep-13
03-Oct-13
15-Oct-13
22-Nov-13
03-Jan-14
23-Apr-14
17-May-14
11-Jun-14
15-Jul-14
Page 18 of 99
Sr. Activity
No.
40. SICOM-VIPL-Consent for creation of charge on land
41. Placement of subordinate debt with SICOM
Date
24-Jul-14
24-Jul-14
3.1.9 For transporting coal from the mines to its power plant at Butibori by rail, VIPL
planned a Railway siding off Sindhi Station, which is the nearest railway station on
the Wardha-Nagpur line of Central Railways. As per the rail alignment plan, this
Railway siding will take off from the Sindhi Station and be connected to the Butibori
plant. Considering the proposed rail alignment route, the siding project required 47
acres of SICOM land in some villages of Tehsil Selu Tehsil in Wardha District.The
Commission notes that VIPL had started the process of arranging for SICOM land for
the Railway siding before the start of work. For Railway Land Licensing also, VIPL
had initiated the process early. For obtaining the land from SICOM, clearances were
required from the Industries and Revenue Departments, GoM, and legal opinions were
also taken within Govt. Clearance from Revenue Department took substantial time
because of pending issues of levy of Non Agricultural Tax assessment on land held by
SICOM and liability of SICOM to pay for additional compensation for one patch of
land. Revenue Department also sought legal opinion as to whether the land could be
sold by SICOM to VIPL since it had been handed over to SICOM by GoM. Further,
SICOM sent a proposal to VIPL for consent for grant of the land on long term lease,
to which VIPL consented. GoM gave the final approval for transfer of land of 46.73
acre to VIPL on long term lease for 30 years.
3.1.9.
With regard to Railway land, the Commission observes that VIPL had applied in
August, 2010 but considerable time was taken in the internal approval process of
Railways, including modification in number of chainage from +95 chainage to (-)
800 chainage, change in Railway rules regarding the land licence fee, etc.
3.1.10. VIPL has asserted that this delay by external agencies was beyond its control, and
that the time overrun in completion of Railway siding work by the scheduled date
could not be attributed to it.
Page 19 of 99
3.1.11. The Commission asked VIPL how COD of Unit 1 was declared without resolving the
issues such as SICOM/Railway land availability, non-supply of linkage coal, etc.
VIPL submitted as follows:
(i) There was no delay in achieving the readiness of the plant to commence COD as
far as construction was concerned. It achieved COD readiness by synchronising
the Unit and achieving the full load within the committed EPC contract schedule.
The key milestones are as under:
Table 4 - Schedule of key milestones, as submitted by VIPL
Sr. No.
1
Particulars
Scheduled COD as per
EPC Contract
Unit 1
Unit 2
27 September, 2012
31 January, 2013
Synchronisation date
25 June, 2012
1 January, 2013
Full load test Completed
17 August, 2012
19 March, 2013
30 months
36 months
33 months
37 months
4
5
Time taken in attaining

full load/COD readiness
COD as per MERC MYT
Regulations, 2011
(ii) VIPL had signed a Medium Term PPA for supply of 134 MW power to RInfra-D
through competitive bidding in September, 2009. VIPL considered that, by
declaring early COD, it could build pressure on the Ministry of Coal
(MoC)/CIL/WCL to execute the FSA for meeting its obligation under the PPA.
However, CIL/ MoC introduced a condition that, to execute FSAs and commence
coal supply, a generating plant should have a Long Term PPA with a Distribution
Licensee.
(iii) VIPL made arrangements to buy coal from e-auction and obtained the
Maharashtra Pollution Control Board (MPCB) permission in March, 2013 for
transporting the coal by road in the absence of Railway siding as an interim
arrangement. Thereafter, it declared COD immediately to fulfil its Medium Term
PPA commitment and maintaining power supply to Mumbai. The early
Page 20 of 99
declaration has helped to reduce the Interest During Contruction (IDC) by Rs.
84.45 Crore, which was transferred to the Profit and Loss account post-COD.
3.1.12. The Commission observes that full load test of Unit 2 was undertaken on 19 March,
2013 and VIPL declared the COD of Unit 2 on 28 March, 2014 i.e., after nearly a
year. The Commission asked VIPL to submit the justification for not declaring the
COD of Unit 2 immediately after achieving full load/COD Readiness. In reply, VIPL
submitted that the possibility of getting linkage coal for operating Unit 2 diminished
for want of assurance from CIL/WCL on commencement of coal supply without a
Long Term PPA and WCLs refusal to release initial carpet/ commissioning coal.
Further, there was very limited availability of e-auction coal and this small window
of opportunity was leveraged to secure coal for Unit 1 only. Moreover, the
connectivity of the plant with the State Transmission Utility (STU) made it even
more unattractive to offer the power outside Maharashtra as the Wheeling cost plus
losses amounted to around Rs 0.50/ kWh. VIPL made several attempts to sell power
in the market through short term bidding, but these were unsuccessful. Therefore, in
the absence of viable off-take from Unit 2, VIPL could not declare Unit 2 COD
immediately after achieving Full Load/ COD readiness.
3.1.13. As regards Unit 1, the Commission observes that VIPL declared its COD also
without resolving the above issues, and asked VIPL to submit the justification. VIPL
submitted that it declared the COD of Unit 2 to fulfil its commitment under the Long
Term PPA with RInfra-D which required commencement of supply from 1 April,
2014, and securing the FSA with WCL. VIPL declared the COD of Unit 2 only after
securing Railway land in January, 2014 and receiving assurance from GoM in March,
2014 on leasing of SICOM land required for completing the Railway siding.
3.1.14. As regards the impact of delay on Project cost, the Commission asked VIPL for the
details of cost overrun from the original estimates to the day of readiness of the
Project. VIPL submitted that, as the Project is implemented based on firm price lump
sum Turnkey EPC contract without escalation clause, there was no overrun in the
hard costs on account of delay in the Project.
Page 21 of 99
3.1.15. The Commission asked VIPL to submit reasons for declaring COD of Unit 1 and
Unit 2 18 months and 6 months prior to the commissioning of Railway siding,
respectively. VIPL submitted that:
(i) Unit 1 was commissioned by considering that coal transportation can be handled
by road as a temporary solution, Unit 1 could be made operational to fulfil the
Medium term PPA, and to meet debt service obligation and reduce the effective
capital cost of the Unit when Long Term PPA takes effect from 1 April, 2014.
(ii) Unit 2 could not have been commissioned without certainty of Railway siding and
based on movement of coal by road transport, which would have involved around
430 truck trips per day, along several highways, village roads, and railway
crossings. Hence, Unit 2 was commissioned after there was certainty on
availability of pending land parcels for completion of Railway siding just before
March, 2014, and considering that a stock of coal of 1.5 Lakh tonnes had been
stocked at the plant site to deal with any shortfall in coal movement by road for 34 months to meet Long Term PPA obligations.
3.1.16. The Commission observes that, despite delays and difficulties in obtaining SICOM
and Railway land for Railway siding, VIPL was able to achieve the COD, and that it
had declared the COD considering its commitment to supply power to RInfra-D
under Medium and Long Term agreements. The Commission notes VIPLs
submission that it would not have been able to tie up the power supply had the COD
been declared based only on the availability of e-auction coal. The Commission
observes that, on the day of readiness for declaring COD for Unit 1, VIPL had an
existing Medium Term PPA for which it could have supplied energy by declaring
COD. Further, VIPL has submitted that the COD was declared to meet its PPA
obligation and in order to reduce the effective capital cost. However, had VIPL
declared COD on the date of readiness of the Plant, the effective capital cost would
have been further reduced, which VIPL had done at a later stage inspite of
unresolved issues remaining the same.
Page 22 of 99
3.1.17. The Commission notes that Unit 1 has achieved COD on 4 April, 2013 and Unit 2 on
28 March, 2014. There is a delay in the commissioning of the Project with respect to
the scheduled dates. With regard to such delay, the Appellate Tribunal for Electricity
(ATE), in its Judgement dated 27 April, 2011 in Appeal No. 72 of 2010, has held as
under:
7.4. The delay in execution of a generating project could occur due to
following reasons:
i) due to factors entirely attributable to the generating company, e.g.,
imprudence in selecting the contractors/suppliers and in executing contractual
agreements including terms and conditions of the contract, delay in award of
contract, delay in providing inputs like making land available to the
contractors, delay in payments to contractors/suppliers as per the terms of
contract, mismanagement of finances, slackness in project management like
improper co-ordination between the various contractors, etc.
ii) due to factors beyond the control of the generating company e.g. delay
caused due to force majeure like natural calamity or any other reasons which
clearly establish, beyond any doubt, that there has been no imprudence on the
part of the generating company in executing the project.
iii) situation not covered by (i) & (ii) above.
In our opinion in the first case the entire cost due to time overrun has to be
borne by the generating company. However, the Liquidated Damages (LDs)
and insurance proceeds on account of delay, if any, received by the generating
company could be retained by the generating company. In the second case the
generating company could be given benefit of the additional cost incurred due
to time over-run. However, the consumers should get full benefit of the LDs
recovered from the contractors/suppliers of the generating company and the
insurance proceeds, if any, to reduce the capital cost. In the third case the
additional cost due to time overrun including the LDs and insurance proceeds
could be shared between the generating company and the consumer. It would
also be prudent to consider the delay with respect to some benchmarks rather
than depending on the provisions of the contract between the generating
company and its contractors/suppliers. If the time schedule is taken as per the
terms of the contract, this may result in imprudent time schedule not in
accordance with good industry practices.
7.5. In our opinion, the above principles will be in consonance with the
provisions of Section 61(d) of the Act, safeguarding the consumers interest
Page 23 of 99
and at the same time, ensuring recovery of cost of electricity in a reasonable

manner.
3.1.18. The ATE Judgement categorises the reasons for delay as controllable, uncontrollable
and neither controllable nor uncontrollable, and specifies the treatment of the impact
of such delays while approving the Project cost.
3.1.19. The Commission observes that the reasons cited by VIPL for the delay in the
commissioning of the Project from the scheduled COD were mainly on account of
delay in the availability of land from SICOM and Railways for the Railway siding,
and delay in execution of FSA.
3.1.20. The Commission notes that, considering the general uncertainty in availability of fuel
in the country, VIPL was not the only party subjected to delay in execution of FSA.
However, the responsibility of arranging for fuel lies with the Generating Company,
and VIPL must or should have accounted for the risk relating to fuel availability at
the outset of the Project. Being aware of issues regarding fuel availability, VIPL
declared COD of the Project to meet its Medium Term PPA commitment by using
coal obtained from e-auction. VIPL has submitted the difficulties in the sustained
operation of the plant as a whole with the transportation of coal by road. Hence,
ultimately the commissioning of the Railway siding was essential.
3.1.21. The Commission notes that VIPL has achieved COD readiness/ completion of full
load for Unit 1 on 17 August, 2012 and for Unit 2 on 19 March, 2013. There was no
delay in the execution of the Project as COD readiness and completion of full load
test for Unit 1 were achieved in 30 months and 36 months, respectively, from the
date of NTP, i.e. earlier than the MERC MYT Regulations, 2011 norms of 33 months
and 37 months, respectively. The Commission observes that the delay was only in the
the declaration of COD of the Project because of the reasons set out above.
3.1.22. The Commission notes that VIPL has declared COD of Unit 1 to fulfil the Medium
Term PPA obligations. The supply delivery date in the Medium Term PPA was 1
April, 2012. However, VIPL has declared COD of Unit 1 on 4 April, 2013, i.e. with a
Page 24 of 99
delay of more than a year. COD readiness/completion of full load for Unit 1 was
achieved on 17 August, 2012 and COD on 4 April, 2013 without commissioning of
Railway siding and execution of FSAs. Hence, the decision not to declare the COD
of Unit 1 even after completion of the full load test was a decision taken by VIPL in
its own interest. According to VIPL, the COD of Unit 1 was declared to meet its PPA
obligation and to reduce the effective capital cost. However, had VIPL declared COD
on the date of readiness, the effective capital cost would have reduced further.
Instead, COD was declared later despite the unresolved issues remaining the same.
The Commission also notes that VIPL has been operating Unit 1 by using coal
transported by road. It was, therefore, possible to do so even without completion of
Railway siding work.
3.1.23. The Commission observes that the delay in acquisition of SICOM land was because
of procedural delays in resolving certain issues between the GoM and SICOM which
which were beyond VIPLs control. Inspite of this, VIPL declared the COD of Unit 2
without commissioning of the Railway siding so as to meet its obligation of supply of
power to RInfra-D. The Commission notes VIPLs submission that it declared the
COD of Unit 2 only when it got clarity on the acquisition of the land for Railway
siding (in January, 2014) and after ensuring sufficient stock of coal for running the
plant till the commissioning of the siding.
3.1.24. VIPL-G issued Letter of Intent (LoI) on 6 July, 2010 to the EPC contractor for
completion of the Railway siding work by 5 July, 2012 (within 24 months), i.e.
before the scheduled COD (27 September, 2012) of Unit-1. However, the work was
completed 27 months late (in October, 2014) mainly because of delay in acquisition
of land and related clearances from SICOM and Central Railways, the details of
which may be seen in the chronology set out earlier. The Commission notes that
VIPL initiated the process of acquiring SICOM land in January, 2009, long before
issuing the EPC contract LoI. After clearance from the Industries Department,
SICOM approached the Revenue Deptt., GoM in June, 2011, but GoM permission
was finally received nearly 3 years later, in April, 2014. This delay was beyond the
control of VIPL, and inspite of its efforts, since matters relating mostly to GoM and
SICOM such as additional compensation to erstwhile land owners, liability of NonMERC Order Case No. 115 of 2014
Page 25 of 99
Agriculture tax on SICOM, legal consultations regarding mode of allotment of land,

change in mode of land allotment from sale to lease, etc. had to be resolved. The
Commission also notes that VIPL initiated the process for land licensing approval
from Central Railways in August, 2010, just after issuing the EPC LoI. The delay in
obtaining that approval was also beyond VIPLs control, involving issues of revision
in assessment of chainage, modifications in assessments of different offices, changes
norms for licence fee, additional undertakings required from VIPL, delays in internal
approval process, etc.
3.1.25. Unit-2 COD was declared on 28 March, 2014 after assurance regarding availability
of pending land parcels for completion of the Railway siding. From that time till
commissioning of the siding in October, 2014, VIPL was running both Units by
transporting coal by road. This was possible because VIPL was able to stock 1.5
Lakh tonnes of coal to meet any shortfall in the movement of coal. However,
operation of both Units with transport of coal by road is unsustainable because of
cost and the fact that the road infrastructure cannot support movement of as many as
430 trucks per day continuously for a long time. Hence, the railway siding was
essential for combined operation of both Units.
3.1.26. As the Project developer, VIPL had a responsibility to declare COD as scheduled, if
necessary by making alternative arrangements for transportation of coal. The
Commission notes that VIPL was able to run Unit 1 by bringing coal by road, and
hence that it was feasible to operate it for some time without the siding. However, the
Railway siding was an integral component for sustained operation of the Project and
was delayed for reasons beyond VIPLs control. Therefore, the Commission is of the
view that the delay in commissioning Unit-1 was neither fully controllable nor fully
uncontrollable. In line with the ATE Judgment dated 27 April, 2011 and in order to
protect the interests of the consumers, the additional Project cost due to time overrun
of Unit 1 should be equally shared by VIPL and the consumers.
3.1.27. While Unit 1 could be operated for some time in this manner, the Commission notes
the genuine difficulty in combined operation of both the Units on the basis of road
Page 26 of 99
transport of coal and without the Railway siding on a sustained basis. The
Commission is of the opinion that the reasons for delay, set out in earlier paragraphs,
in the commissioning of Unit 2 cannot be attributed to VIPL and must be treated as
uncontrollable. Hence, in line with the ATE Judgement dated 27 April, 2011 cited
earlier, the Commission allows the additional Project cost due to time overrun of Unit
2 on actual basis.
3.1.28. The Commission considers it prudent to consider the delay with respect to some
benchmarks rather than solely on the time-lines provided in the contract for execution
of the Project. VIPL has also referred to the MERC MYT Regulations, 2011
regarding the project completion period. The Commission has considered the
benchmark in accordance with those Regulations, which provide as under:
A. Thermal Power Projects: Coal/Lignite Power
200/210/250/300/330 MW and 125 MW CFBC technologies:
Plant:
Unit
size
(a) 33 months for first Unit of green field projects. Subsequent Units at an
interval of 4 months each.
(b) 31 months for first Unit of extension projects. Subsequent Units at an
3.1.29. The Commission directed VIPL to submit the impact of the delay in commissioning
on the Overheads, IDC and Foreign Exchange Rate Variation (FERV) as compared
to the norms specified under the Regulations. VIPL submitted that, had the project
been commissioned as per those norms, Overheads, IDC and FERV would be as
under:
Table 5 - Project cost had COD been as per MYT Norms, as submitted by VIPL (Rs.
crore)
Sr.
No.
1
2
Particulars
Hard Cost
Pre-operative and
commissioning expenses
Cost for
Cost for
Unit 1
Unit 2
Project Cost
1544.50
1264.22
2808.72
132.69
108.37
240.76
Page 27 of 99
Sr.
No.
Particulars
Cost for
Cost for
Unit 1
Unit 2
Project Cost
IDC
176.82
224.83
401.65
FERV
104.48
112.53
217.01
Total Project Cost
1958.19
1709.95
3668.13
3.1.30. As directed by the Commission, VIPL submitted details of actual Overheads, IDC
and FERV of Units 1 and 2 as under:
Table 6 - Unit-wise Actual Project cost as on COD, as submitted by VIPL (Rs. crore)
Sr.
No.
1
2
Particulars
Cost for
Cost for
Unit 1
Unit 2
Hard Cost
Pre-operative and
commissioning expenses
Project Cost
1544.50
1264.22
2808.72
144.97
136.86
281.83
IDC
254.90
308.95
563.85
FERV
143.92
206.83
350.75
Total Project Cost
2088.29
1916.86
4005.15
3.1.31. In view of the above, the Commission observes that the delay in Commissioning
of Unit 1 cannot be categorized either fully controllable or uncontrollable. In
light of the forgoing, the Commission, for approving the project cost, has
considered equal sharing of impact of delay of Unit 1 on overheads, IDC and
FERV (i.e. difference between the actual cost for Unit 1 and estimated cost for
Unit 1 considering COD as per MYT norms) between VIPL and consumers. The
Commission has considered the actual cost of Unit 2, treating delay in the
commissioning of Unit 2 as uncontrollable.
3.1.32. The Commission has considered the approval of costs under each head in subsequent
sections of this Order.
Page 28 of 99
3.2.
3.2.1.
Submission of VIPL on Capital Cost

Regulation 38.5 of the MERC MYT Regulations, 2011 provides that a Generating
Company has to approach the Commission for approval of capital cost and
determination of final Tariff as follows:
38.5 A Generating Company shall make a fresh Petition in accordance with
these Regulations, for determination of final tariff based on actual capital
expenditure incurred up to the date of commercial operation of the Generating
Station duly certified by the statutory auditors based on Annual Audited
Accounts.
3.2.2.
Along with Chartered Accountant (CA)s certificate, VIPL submitted that the overall
capital cost of the generating station as on COD of Unit 2 (28 March, 2014) is Rs.
4005.15 Crore, based on the audited accounts as on that date.
3.2.3.
The break-up of the capital cost as on COD, as submitted by VIPL, is as under:

Table 7 - Project Cost as on COD, as submitted by VIPL (Rs. crore)
Sr. No.
Particulars
Actual Cost as on COD
Land
85.36
BTG
790.12*
BOP
1695.87
Initial Spares
Taxes and duties
179.00
Overheads
281.83
OSBL
IDC & FC
Total Capital Cost
10
Impact of FERV
11
Total Project cost as on COD
22.34
36.03
563.85
3654.40
350.75
4005.15
*BTG Cost in 170.48 MUSD
3.2.4.
VIPL submitted that the benchmark capital cost provided by the Central Electricity
Regulatory Commission (CERC) in Order dated 4 June, 2012 in Case No. L-
Page 29 of 99
1/103/CERC/2012 for a thermal power station with coal as fuel for a single 500 MW
Unit is Rs. 5.08 Crore per MW as on December, 2011. The actual hard cost
(including additional capitalisation) excluding land cost, infirm power and Railway
siding, of Rs. 5.16 Crore per MW for the generating station at Butibori is competitive
considering the comparable CERC benchmark of Rs. 5.39 Crore after considering
3% escalation for two years.
3.2.5.
VIPL submitted that it had opted for the following additional features in order to
meet Project- specific requirements:
Table 8 - Additional features of the plant, as submitted by VIPL
Sr.
Equipment /
No.
Services
Convention
al
thermal
power plant
Additional features of
VIPL plant
Remarks
Normally
Land
the
plants
are
located
in
remote
areas where
cost of land
Land is located near

Nagpur
city and
in
industrial area where

land cost is high
Location being in industrial

area has reduced the need to
acquire
agricultural
thereby
helping
land,
the
environment
is low
Dedicated
Single Pump
Cooling
House
Water(CW)
both
/Auxiliary
with
Cooling
common
Water
standby
(ACW) Pump pump
for
Units,
CW/ACW
pump house for each

Unit with Standby CW
pump for each Unit.
Electric
In the available layout it was
Overhead not possible to accommodate
Crane (EOT) crane for two cooling towers with

each pump house.
for
both Units.
Ventilation
forebay
and
each CW/ACW pump house.
CW pump house.
Dedicated
treatment
for
common
CW
system
for
Page 30 of 99
Sr.
Equipment /
No.
Services
Convention
al
thermal
power plant
VIPL plant
Remarks
each Unit.
For
Unit-I,
quality
the
water
clarified
is
made
available by MIDC. RCC

reservoir was found to be
Raw
Water Earthen
Storage
necessary to maintain the
Roller-compacted
(RCC)
concrete
reservoir
reservoir
better water quality of the

water supplied by MIDC.
Raw
water
required
reservoir
capacity
of
with
earthen embankment could

not be accommodated in
available space
In addition to Wagon
Coal
Coal Receipt
Handling
only
Plant (CHP)
Railway
by
Tippler
Arrangement, Facility to receive the coal
dedicated
coal by truck is incorporated in
unloading & crushing the system so that blending

system for coal receipt of market coal can be done.
by road is provided.
Lean Phase
5
Ash handling Ash

Plant (AHP)
Slurry
disposal
System.
High
Concentration
Slurry Disposal System

for fly ash disposal
To meet MoEF clearance

requirement
Ash
Pond
capacity
6
Ash Pond
Earthen Ash
Pond
RCC Ash Pond
of
required
with
earthen
embankment could not be

accommodated in available
space. Therefore Ash Pond is
constructed out of Plum
Page 31 of 99
Sr.
Equipment /
No.
Services
Convention
al
thermal
power plant
VIPL plant
Remarks
concrete
as
conventional
against
earthen
Ash
Pond.
Butibori
water
contains
higher colloidal silica (6 ppm

against less than 1 ppm).
Ion
Colloidal silica cannot be
exchange
Demineralisa
7
tion
vessels
Plant without
(DM Plant)
Ultra
In
addition
to
Ion
exchange vessels, Ultra

filtration System is used
filtration
removed by conventional ion

exchange process, but only
by Ultra filtration process.
Therefore
Ultra
filtration
system has been considered
system
for removal of
silica
colloidal
present
in
dematerialized water.
Higher
Cycles
Concentration
adopted
Water
without Side
Treatment
Stream
Filtration
system
per
MOEF
of water. Due to higher
dosing
system
(COC)
Clearance for conservation
Chemical
Cooling
as
of
COC, suspended particles in

Side Stream Filtration the
system
CW
permissible
water
exceed
limit
recommended by Cooling
Tower fill manufacturer. To
maintain suspended solids
below permissible limit, side
stream filter is used in CW
circuit to remove suspended
Page 32 of 99
Sr.
Equipment /
No.
Services
Convention
al
thermal
power plant
VIPL plant
Remarks
solids.
Vapour
Absorption
Machines
9
Screw
Air
Conditioning
Chiller
(VAM) Due to its low operating cost,

is
provided VAM Chiller is provided in
Chillers are which will be in the centralized air conditioning

used
operation
chiller
&
will
screw system
be
in
addition
to
in conventional screw chiller.
standby mode.
Mechanical conveyor will
Pneumatic
Mill
10
Reject
Handling
System
ensure
Mill Reject Mechanical
uninterrupted
Redder operation of the mill even if
Handling
conveyor operated mill rejects
are
more
than
System,
reject handling system designed quantity, i.e. output
common for is provided.
of the unit will not be
two units.
affected in case of receipt of

poor quality coal.
Reverse
11
Osmosis
No RO Plant RO Plant envisaged
To meet MPCB requirement.
(RO) System
Widening of external drain
12
Widening of
Widening of external Culverts was carried out as
External
drain required to be per recommendation of M/s
Drain
included
WAPCOS pursuant to the

requirement of MoEF.
Pipeline of 18 Kms
13
Raw
Water
System
implemented requiring
road
crossing
and
railway
VIPL constructed a pipeline

of around 18 km as against a
nominal
requirement
around 5 km
of
for other
conventional power plants.
Page 33 of 99
Sr.
Equipment /
No.
Services
Convention
al
thermal
power plant
VIPL plant
Remarks
MIDC had asked VIPL to
make alternate arrangements
to get the water supply for
the station. Further, VIPL
encountered
crossing
Railway
and
State
&
National Highways and in

order to avoid disruption of
traffic,
Push
through
technology had to be adopted

for laying the pipeline.
3.3.
3.3.1.
Land
VIPL submitted that the actual cost of land incurred as on COD was Rs. 85.36 Crore.
3.3.2.
The Commission asked VIPL for a statement of land acquired from all sources along
with the acquisition rate. VIPL mentioned that the rates of MIDC land had increased
from Rs. 4 Lakh/acre to Rs. 19 Lakh/acre, and the Commission asked for supporting
documents. VIPL submitted summary statement of land acquired along with average
acquisition rates as below:
Table 9 - Cost of Land, as submitted by VIPL
Avg. Acquisition
Sr.
Source/Type of
Area (In
Total Cost
No.
Land Acquired
Acres)
(In Rs. Lakh)
MIDC Land
298
2384.00
8.00
Private Land
257
6137.00
23.88
Rate (Rs.
Lakh/Acre)
Page 34 of 99
The following Table gives the details of land acquired from MIDC at rates varying
from Rs. 4 Lakh to Rs. 19 Lakh/Acre:
Table 10 - Details of Cost of MIDC Land, as submitted by VIPL
MIDC Land
3.3.3.
Area
Cost of Land
Rate
In Sq. Mtr
In Acres
Rs. Crore
Rs. Crore/Acre
D-3
700000
173.00
7.00
0.04
D-3/Part
200000
49.00
3.45
0.07
D-3/Part 1
205099
51.00
8.20
0.16
RS-1
101175
25.00
4.05
0.16
P-81
1250
0.31
0.06
0.19
P-82
1440
0.36
0.07
0.19
The Commission referred to the land lease agreements and other documentary
evidence submitted by VIPL.
3.3.4.
The Commission notes that the land cost claimed by VIPL is the actual cost incurred by
it. Hence, the Commission has considered the actual cost incurred for land as on COD.
3.4.
3.4.1.
EPC Contract
VIPL submitted that the development of project was undertaken through EPC
contracts, and that it has awarded the turnkey EPC contract to RInfra on fixed price
basis. VIPL stated that it gave Notice to Proceed (NTP) for Unit 1 on 27 February,
2010 and for Unit 2 on 30 April, 2010, with a commissioning schedule of 31 months
for Unit 1 and 34 months for Unit 2 from the respective dates of NTP.
3.4.2.
VIPL also submitted that there has been no price variation in the domestic cost
component. The cost of the main equipment of the plant, i.e., Boiler, turbine and
generator, civil works and Commissioning and Installation (C & I) package, is
competitive in comparison to similar Projects, and that VIPL had ensured due
diligence as regards the scope of work in the EPC contract.
3.4.3.
VIPL submitted that it has incurred the following BTG and BOP costs as on COD:
Page 35 of 99
Table 11 - BTG and BOP Cost, as submitted by VIPL (Rs. Crore)

Sr.
No.
Particulars
Cost
BTG (plant and equipment)
Design and engineering
BOP Mechanical
595.12
BOP Electrical
329.60
Commissioning and Installation package
BTG Erection Services
143.24
Civil Works
531.07
Taxes and duties
179.00
Total BTG and BOP
790.12
42.68
54.16
2664.99
The Commission had directed VIPL to show how least cost principles and
competitive bidding route have been followed while awarding the EPC contract.
VIPL submitted that the Butibori project was originally conceived as one Unit of 300
MW to be developed as GCPP. This was awarded by MIDC through competitive
bidding process. Originally, 51% of the power was required to be sold to industrial
consumers with their equity participation so as to qualify as a GCPP. Subsequently,
an additional capacity of 300 MW was undertaken at the same site. Ensuring its
competitiveness of the Project has been at the core of its development. The Project is
being executed by awarding EPC contract whereby the entire responsibility of
construction is with the contractor. The EPC contract price offered by RInfra was
compared with cost benchmarks for similar projects at that point of time, and with
BTG supply awarded to Reliance Infra Projects (UK) Ltd. VIPL submitted further
that, for competiveness of procurement, it had also undertaken due diligence on the
market dynamics prevalent at the time of contract award. There are two types of
packages for the construction of a power plant, viz. mandatory packages (BTG, BOP,
Civil, etc,), and Project-specific additional packages (township, transmission line and
Railway siding). A comparison was undertaken with mandatory packages. In early
2008, similar Units (2 x 270 MW) were ordered by M/s GVK for a Project in Punjab.
Page 36 of 99
GVK awarded the main packages through a competitive bidding process. The GVK
contracts are understood to have standard price escalation clauses. The other
precedent was from Maharashtra, where the Maharashtra State Power Generation Co.
Ltd. (MSPGCL), the State Generating Company, had awarded the EPC of Paras Unit
3 (250 MW) to M/s BHEL through competitive bidding. The contract, it had a price
escalation clause of 20%. The rationale for selection of these Projects for
benchmarking was the similarity of Unit size, similar time frame for contract award,
and since credible information on these Projects could be gathered from the public
domain. VIPL provided a broad comparison of these Projects as under:
Table 12 - Benchmarking of Capital Cost, as submitted by VIPL
Particulars
Year of Award
EPC Cost ( BTP, BOP & Civil) (Rs
Crore)
Price Escalation factor#1
Total(Rs Crore)
Removal of cost advantage for 2 Units
configuration for sharing of common
facilities #2
Total Per Unit (Rs Crore)
Per MW (Rs. Cr./MW)
GVK
(2x270)MW
2008
Paras 3
(1x250)MW
2007
VIPL
(1x300) MW
2008
2221
1.1
2443
1195
1.1
1315
1390
1@
1390
55%
1344
4.98
NA
1315
5.26
NA
1390
4.63
# 1: Assumed to be equivalent to 10% over a 4 year tenure of Project construction period.

# 2 : Correction for cost advantage of 2 Unit configuration v/s single Unit. First Unit taken as
55% of total EPC Cost.
@ : VIPL awarded the EPC Contract on fixed price basis.
3.4.4.
VIPL submitted that the average price of BTG, BOP and civil contract for these
similar Projects was between Rs 4.98 to Rs 5.26 Crore/MW. The variation was
perceived to be on account of the fact that the two Units of GVK would use certain
facilities in common and, therefore, the cost per MW would be lower in comparison
to Paras Unit -3, which was more like a greenfield Unit.
3.4.5.
Since the initial intention idea was to develop a 300 MW Unit as a GCPP, the
ordering cost as in Paras Unit-3 was considered for comparison. Subsequently, when
it was decided to take up the second Unit , the cost of the GVK project was
Page 37 of 99
considered relevant in view of the sharing of certain facilities by both Units.

Therefore, VIPL undertook exercise to optimise the cost of the second Unit. The
comparison of EPC award cost for the 2 units (600 MW) below is made to
substantiate its competitiveness.
Table 13 - Benchmarking of per MW cost, as submitted by VIPL
Particulars
Capacity (MW)
EPC Cost ( BTG, BOP & Civil) (Rs Crore)
Price escalation factor #
Total (Rs Crore)
PER MW (Rs Crore/MW)
GVK
VIPL
540
2221
1.1
2443
4.52
600
2636
1@
2636
4.39
# : Assumed to be equivalent to 10% over a 4 year tenure of Project construction period.

@ : VIPL awarded the EPC Contract on fixed price basis.
3.4.6.
The Commission notes VIPLs submission that the ordering cost for both its Units
compares well with that of the GVK Units. VIPL submitted that, with the addition of
Unit 2, the EPC cost was reduced considerably due to optimization in design,
efficient capacity utilization of the existing infrastructure and the common facilities.
The least cost principle was, therefore, ensured.
3.4.7.
Subsequently, VIPL had compared the EPC cost of some other generating Stations
developed by Central and State Sector entities. The EPC cost for Central Sector
Projects was in the range of Rs. 5.04 Crore/MW to 5.48 Crore/MW, and between Rs.
5.13 Crore/MW to 5.93 Crore/MW for State Sector Projects.
3.4.8.
The Commission notes that VIPL has endeavoured to follow the least cost approach
for award of the EPC contract for BOP and BTG. The EPC contract, popularly
known as Turnkey Contract, is awarded to a single contractor responsible for the
Supply, Erection and Commissioning of a project, to be completed within the time
period fixed, and based on agreed price and guaranteed performance.
3.4.9.
The Commission notes that VIPL has followed the least cost approach while
awarding the EPC contract (including BTG, BOP and Civil works) and awarded the
Page 38 of 99
contract on firm price basis. Further, the actual cost of EPC contract (including BTG,
BOP and civil works) is lower than its ordering cost.
3.4.10. For the purpose of approving the capital cost, the Commission has considered
the actual cost incurred for BTG package, BOP including civil works, and taxes
and duties paid for the Project.
3.5.
3.5.1.
Initial Spares as part of the Capital Cost as on COD

VIPL submitted that it has incurred an actual cost Rs.22.34 Crore, as on COD, for
initial spares.
3.5.2.
The Commission directed VIPL to furnish the list of initial spares included in capital
cost and documents justifying procurement of such spares. VIPL submitted that the
procurement of initial spares was based on general recommendations of Original
Equipment Manufacturers (OEM) to the EPC contractor, and submitted a list of
spares for Unit 1 and Unit 2 as provided to it.
3.5.3.
As regards the cost of spares, Regulation 27.7 of the MERC MYT Regulations, 2011
specifies as under:
27.7 The capital cost may include capitalised initial spares for a maximum of
first five years of operation as follows:
(a) upto 2.5% of original capital cost in case of coal based/lignite fired
Generating Stations...
3.5.4.
The Commission observes that the cost of initial spares capitalised till COD is
within 2.5% of Project cost as approved in this Order, as stipulated in
Regulation 27.7 of the MERC MYT Regulations, 2011. Accordingly, the
Commission has allowed the actual cost of initial spares amounting to Rs 22.34
Crore as on COD, being within the ceiling specified in the Regulations.
Page 39 of 99
3.6.
3.6.1.
Outside Boundary Limits (OSBL)

VIPL submitted that it has incurred Rs. 36.03 Crore as cost of OSBL as on COD for
the Project, which pertains to the water conveyance system. The cost variation of the
water conveyance system compared to original estimates was because of finalisation
of the scope of work after the original estimates were made.
3.6.2.
The Commission notes that Railway siding, water conveyance system and
transmission lines were included in OSBL in the original estimates. After the change
in the nature of the Project from a GCPP to an Independent Power Plant (IPP), the
transmission lines have been separated from the generation and made a part of Intra
State Transmission System (InSTS). Further, because of the delay in its
commissioning, the Railway siding has been considered by VIPL in additional
capitalisation in FY 2014-15. The Commission notes that the cost incurred towards
OSBL pertains only to the water conveyance system.
3.6.3.
The Commission notes that the amount claimed under OSBL by VIPL is the
actual cost incurred for the water conveyance system. The Commission has
accordingly considered a cost of Rs. 36.03 Crore for OSBL.
3.7.
3.7.1.
Overheads
VIPL submitted that the cost of actual overheads as on COD is Rs. 281.83 Crore as
against the estimate of Rs. 155 Crore. The increase is on account of higher than
anticipated expenditure on the following:
(i) Capital cost contribution paid to MIDC for water allocation: Against the total water
requirement of 22 MLD for a Unit, MIDC initially allotted 15 MLD without charging
capital cost contribution (one time payment to MIDC). For the balance 7 MLD, MIDC
charged fees as capital cost contribution.
(ii) Restoration charges paid to Irrigation Department for water allocation: As per MIDC
policy, water shall be provided by MIDC for the industries located in its MIDC area.
However, due to non-availability of water allocation to MIDC from the Irrigation Deptt.,
Page 40 of 99
MIDC
asked
VIPL
to
arrange
water
from
alternate
sources.
Vide
letter
VIPL/NGP/IRRIG/09/001 dated 3 January, 2009, VIPL accordingly approached

Irrigation Department and obtained water allocation for the Project. The Irrigation
Department has levied restoration charges.
(iii)Start up expenses have increased primarily on account of higher than anticipated
expenditure on:
- Purchase of market coal (instead of linkage coal)
- Significantly reduced revenue from Infirm power considering MSEDCL's policy of
paying for infirm power only during peak hours
- Start up power from MSEDCL.
3.7.2.
VIPL also submitted that the overheads for Railway siding and other systems which
are yet to be completed have not been considered.
3.7.3.
The Commission directed VIPL to submit details, with reasons and documents, of the
increase in each of the overhead costs vis-a-vis the original estimates. VIPL
submitted as under:
Table 14 - Details of Overheads, as submitted by VIPL
Particulars
Charges to MIDC
for water supply
Charges to
Irrigation
Department for
water
supply
Start up Expenses
- Fuel
Original
estimates
(Rs.
Crore)
0
0
30.00
Actual
Cost
Reasons for variation
(Rs.
Crore)
11.27 Capital cost contribution was paid in order to
get water allocated for the Project.
12.73 Due to non-availability of water allocation
from MIDC, VIPL was required to arrange
water from Irrigation Department, GoM.
Irrigation Department directed VIPL to pay
restoration charges for allocating water for the
Project.
44.78 As the linkage coal for start up and testing of
the Project was not made available by WCL in
the absence of FSA, VIPL had to procure
market coal. Also, there was an increase in
HFO / LDO prices which added to the costs.
Page 41 of 99
Particulars
Employee and
other
Administration /
establishment
Expenses
Sale of infirm
power
Total
3.7.4.
Original
estimates
(Rs.
Crore)
145.00
-20
155.00
Actual
Cost
Reasons for variation
(Rs.
Crore)
213.30 The power sector employment market scenario
had undergone a change during the
implementation of the Pproject as compared to
the initial estimates. In addition, the
recruitment of employees who would be
subsequently taking over the operations of the
Project also took place as envisaged. The
employee cost based on such requirements has
been considered in the actual cost. The
establishment and administrative costs have
also gone up as compared to the initial
estimates. However, theses expenses have
reduced as a percentage of total overheads
-0.25 Sale of infirm power for 5 days for each Unit
was envisaged earlier. However, in the
changed power supply scenario in the State,
with the revised policy of MSEDCL to pay for
infirm power only during peak hours and
absorb infirm power free of cost during off
peak hours, VIPL had no option but to inject
infirm power in MSEDCLs grid on the
latters terms. This led to under recovery of
revenue from supply of infirm power as
compared to that envisaged earlier.
281.83
The Commission notes that MIDC, vide letter dated 14 July, 2010, had agreed to
supply 15 MLD of water to VIPL. MIDC had also agreed to meet VIPLs demand for
additional 7 MLD of water at Rs. 18.50 per cubic meter (subject to revision from
time to time) and capital contribution of Rs.16,100/- per cubic meter. The total
capital contribution for 7 MLD water is mentioned in the letter as Rs. 11.27 Crore
payable to MIDC by VIPL.
3.7.5.
The Commission notes that, on VIPLs request for additional water required for Unit2, vide letter dated 6 November, 2008, MIDC informed VIPL that that it could not
meet this additional demand, and advised VIPL to obtain water reservation from
some other source through the Irrigation Department. This additional water
requirement has been allocated by the Irrigation Department from the Wadgaon
Page 42 of 99
reservoir upon payment of restoration charges. The Commission has verified the
factual position from letter
dated 19
June, 2009 under which the Irrigation Department has allocated 12.35 MLD of water
to VIPL for industrial purposes from the Wadgaon reservoir.. The Commission
accordingly approves the amount of Rs 12.73 Crore payable to the Irrigation
Department for the additional water supply.
3.7.6.
With regard to the fuel cost and revenue from infirm power before COD, VIPL
submitted the details of the bills raised and payments received for the supply of
infirm power. Details of infirm generation and fuel cost have also been obtained by
the Commission.
3.7.7.
The Commission observes that VIPL has capitalised the amount of fuel cost less
revenue on account of infirm generation of power. As these expenses have been
incurred prior to the COD, the Commission has considered them as a part of capital
cost.
3.7.8.
As regards the treatment of fuel expenses incurred after COD of Unit 1 and before
the COD of Unit 2, the Commission notes that such expenses have been considered
as part of the P&L account and have been excluded from the pre-operative expenses
as part of the project cost.
3.7.9.
The Commission notes VIPLs submission that the recruitment of employees who
would be subsequently taking over the operations of the project also took place as
envisaged. The employee cost based on this requirement has been considered in the
actual cost. The establishment and administrative costs have increased as compared
to the initial estimates.
3.7.10. The Commission notes that the actual cost of overheads is Rs. 144.97 Crore for Unit
1 and Rs. 136.86 Crore for Unit 2.
Page 43 of 99
3.7.11. The Commission has considered the Unit-wise allocation of overheads as on

COD considering VIPLs submissions as these are actual expenses incurred for
the Project. However, as discussed earlier at para 3.1.31, on account of time
over-run, for the purpose of approving the capital cost the Commission has
considered the sharing of additional cost for Unit 1 (i.e. the difference between
the actual and estimated overheads for Unit 1 considering COD, as per MYT
norms) equally between VIPL and consumers. Further, overheads pertaining to
Unit 2 have been considered as per actuals as on COD, considering the delay in
COD of Unit 2 as uncontrollable.
3.7.12. The Overheads approved by the Commission are given in the Table below:
Table 15 Overhead Cost approved by the Commission (Rs. Crore)
Particulars
Overheads for Unit 1
Actual Overheads for Unit 1 as on COD
Overheads for Unit 1 as per time-lines for COD
for Unit 1 based on MYT Regulations
Increase of Overheads for Unit 1 due to time overrun
Sharing of increase in Overheads
Overheads approved for Unit 1
Overheads for Unit 2
Actual Overheads for Unit 2 as on COD
Total Overheads
3.8.
3.8.1.
Cost
144.97
132.39
12.58
6.29
138.68
136.86
275.54
Interest during Construction (IDC)

VIPL submitted that it has incurred IDC of Rs. 563.85 Crore as on COD of the
Project as against the original estimate of Rs. 398 Crore. The increase was due to
delay in achieving COD of Units 1 and 2 because of non-availability of SICOM land
and Railways approval required for completion of Railway siding. The delay has
been for reasons beyond the control of VIPL.
Page 44 of 99
3.8.2.
The Commission observes that VIPL has considered IDC on Plant & Machinery,
Buildings, transmission lines and intangible assets only, and asked for the reasons.
VIPL submitted that, as per Accounting Standard-16 (AS16), borrowing costs are
capitalized under qualifying assets, i.e. Plant & Machinery, buildings, transmission
lines and intangible assets. The qualifying assets are the assets that take substantial
time to get ready for use. Computers, land, furniture & fixtures and vehicles are
bought out assets and, hence, are not qualifying assets.
3.8.3.
The Commission asked VIPL to submit the basis of assumptions for allocation of
interest to plant and machinery, buildings, transmission line and intangible assets.
VIPL submitted that:
(i) The mapping of foreign and rupee loans has been done to different class of
assets in order to decide the allocation of interest.
(ii) Individual assets are classified into Plant & Machinery, buildings,
transmission and intangible assets in accordance with Schedule XIV of the
Companies Act, 1956.
(iii) Plant and machinery - BTG assets are entirely mapped to foreign loan as it
was availed for financing imported equipment, i.e. buyers credit fully and
balance requirement through External Commercial Borrowing (ECB).
(iv) Balance Plant and Machinery assets (other than BTG) are mapped to
remaining ECB loan after allocating to the BTG portion and Rupee loan;
transmission line and intangible assets are mapped to Rupee loan.
Based on the mapping of loans as above, the interest on each loan has been allocated
to each of the mapped assets. For allocation of interest after COD of Unit 1, the same
methodology of mapping and allocation of loans has been considered. However,
interest of Rs. 84.45 Crore corresponding to capitalised assets of Unit 1 was
transferred to the P&L account, and interest of Rs. 46.25 Crore corresponding to
capital work in progress was apportioned to Capital Work in Progress (CWIP).
3.8.4.
As regards the IDC capitalised, in response to the Commissions query, VIPL

submitted the allocation of IDC and Financing charges as under:
Page 45 of 99
Table 16 - Details of IDC and Financing charges as submitted by VIPL (Rs. Crore)
3.8.5.
Sr. No.
Particulars
Interest During Construction (IDC)
Financing Charges
Total IDC and Financing Charges
VIPL
VIPL-T
509.04
2.40
54.81
0.41
563.85
2.81
The Commission also asked VIPL to clarify capitalisation of IDC towards Unit 1 as
on COD. VIPL confirmed that IDC of Rs. 148.77 Crore has been capitalized at the
time of COD of Unit 1.
3.8.6.
The Commission notes that IDC of Rs. 148.77 Crore was capitalised at the time of
COD of Unit 1. The capitalised cost for Unit 1 amounts to Rs. 1989.71 Crore, and to
Rs. 1917.91 Crore for Unit 2, which is lower than Unit 1. However, based on the
submission of VIPL, as against capitalisation of IDC of Rs. 563.85 Crore, only Rs.
148.77 Crore has been capitalised for Unit 1. The Commission asked VIPL for the
reason for capitalising only Rs. 148.77 Crore out of the total IDC of Rs. 563.85 Crore
despite the fact that capital cost of Unit 1 is higher than that of Unit 2.
3.8.7.
VIPL submitted that, at the time of CoD of Unit 1 on 4 April 2013, certain common
facilities in BOP could not be capitalised. These common facilities were
commissioned and capitalised along with Unit 2. Some of the non-critical assets such
as boundary wall, annexe building, furniture, lab equipments, tools, etc. were
capitalised on 31 October, 2013. Further, most of the common facilities such as
switchyard, equipments, coal, fuel oil and ash handling systems, control and power
house building, DCS system, chimney, passenger elevator, service and canteen
building, roads, drains, sewage treatment plant and other miscellaneous common
facilities with respect to Unit 1, being common to both Units, were capitalised on 28
March, 2014.
3.8.8.
The Commission notes that IDC has been allocated and capitalised in stages, and the
total IDC attributable to Unit 1 and Unit 2 is as under:
Page 46 of 99
Table 17 - IDC and Financing charges, as submitted by VIPL
3.8.9.
Sr. No.
Particulars
Rs. Crore
IDC attributable to Unit 1
Capitalised on 4 April, 2013
148.77
Capitalised on 31 Oct, 2013
6.57
Capitalised on 28 March, 2013
Total IDC attributable to Unit 1
254.90
IDC attributable to Unit 2
308.95
Total IDC
563.85
99.56
The Commission sought details of the increase in cost on account of delay of the
Project from the original estimates to the actual COD of the project. VIPL submitted
that the greater than expected time taken for achieving Project COD was on account
of factors beyond its control. VIPL requested that IDC till actual COD of the Project
be allowed in the Project Cost since there is no delay attributable to VIPL in
achieving the readiness of plant for COD or the actual COD, and that it had worked
out the impact due to delay.
3.8.10. As discussed in Para 3.1.31, on account of time over-run, for the purpose of
approving the capital cost, the Commission has considered the sharing of cost
over-run for Unit 1 (i.e. difference between the actual and the estimated IDC for
Unit 1 considering COD as per MYT norms) on this account equally between
VIPL and consumers. Further, IDC pertaining to Unit 2 has been considered as
per actuals as on COD, considering the delay in COD of Unit 2 as uncontrollable.
3.8.11. In view of this, IDC after factoring this delay has been worked out. Accordingly, IDC
of Rs. 524.81 Crore is approved, as set out in Table 18 below:
Table 18 - IDC approved by the Commission (Rs. Crore)
Particulars
IDC for Unit 1
Actual IDC for Unit 1 as on COD
IDC for Unit 1 as per MYT norms
Cost
254.90
176.82
Page 47 of 99
Particulars
Increase in IDC due to time over-run
Sharing of increase in IDC
IDC approved for Unit 1
IDC for Unit 2
Actual IDC for Unit 2 as on COD
Total IDC
3.9.
3.9.1.
Cost
78.08
39.04
215.86
308.95
524.81
Foreign Exchange Rate Variation

VIPL submitted that it has considered Rs. 350.75 Crore on account of exchange rate
variation on foreign loan.
3.9.2.
The Commission sought the detailed computations of FERV till COD of the project.
The Commission notes that VIPL has considered the FERV on account of ECB and
Buyers Credit (BC). The break-up of the FERV capitalised is as under:
Table 19 - Details of FERV, as submitted by VIPL
3.9.3.
Sr. No.
Particulars
Cost (Rs. Crore)
ECB loan
210.25
Buyers Credit
140.50
Total FERV
350.75
The Commission asked VIPL to submit the basis of capitalisation of FERV based on
Project COD. VIPL submitted that Regulation 27.1 of the MYT Regulations, 2011
allows the capitalisation of FERV on foreign currency loan based on COD of the
Project.
3.9.4.
Regulation 27.1 of the Regulations specifies as follows:

27.1 Capital cost for a project shall include:
(a) the expenditure incurred or projected to be incurred, including interest
during construction and financing charges, any gain or loss on account of
foreign exchange risk variation on the loan during construction up to the date
Page 48 of 99
of commercial operation of the project, as admitted by the Commission, after

prudence check;
3.9.5.
Thus, Regulation 27.1 stipulates FERV on the loan during construction period upto
the COD and does not stipulate that FERV shall be capitalised on the COD of the
Project. The Regulations also allow declaration of COD Unit-wise for a thermal
project. In other words, capitalisation of the Project is allowed Unit-wise, and any
FERV corresponding to a specific Unit also needs to be capitalised with that Unit
since the foreign loan corresponds to that Unit, as is the case with hard cost and IDC.
In the present case also, VIPL has capitalised the Projects hard and other costs along
with IDC allocable to specific Units on the COD of the Units. Hence, for FERV also,
capitalisation is required to be done Unit-wise. The Commission notes that, for
treatment of FERV after such capitalisation, VIPL has filed a separate Petition which
is under consideration.
3.9.6.
VIPL has claimed FERV of Rs 350.75 Cr on the basis of capitalisation of FERV as

on the Project commissioning date. However, since the two Units were
commissioned on different dates, it would not be prudent to allow capitalisation of
FERV of Unit 1 as on the Project COD. The Commission is of the view that FERV
should be capitalised on the commissioning dates of the respective Units so that the
FERV post COD of the Unit does not form part of the capitalised cost.
3.9.7.
The Commission notes that FERV of Rs. 143.92 Crore pertains to Unit 1 and Rs.
206.83 Crore to Unit 2. VIPL has provided the details of unit-wise capitalisation of
FERV based on the benchmark period specified in the Regulations.
3.9.8.
As discussed at Para 3.1.31, on account of time over-run, for the purpose of

capital cost approval the Commission has considered the sharing of cost overrun for Unit 1 (i.e. difference between the actual and the estimated FERV for
Unit 1, considering COD as per MYT norms) on this account equally between
VIPL and consumers. Further, the FERV pertaining to Unit 2 has been
considered as per actuals as on COD, and the delay in COD for Unit 2 as uncontrollable.
Page 49 of 99
3.9.9.
In view of the above, the FERV, after factoring this delay, has been worked out at Rs.
331.03 Crore. The FERV approved by the Commission is given in Table 20 below:
Table 20 - FERV approved by the Commission (Rs. Crore)
Particulars
FERV for Unit 1
Actual FERV for Unit 1 as on COD
FERV for Unit 1 considering COD as per MYT
norms
Increase of FERV due to time over-run
Sharing of increase of FERV
FERV approved for Unit 1
FERV for Unit 2
Actual FERV for Unit 2 as on COD
Total FERV
Cost
143.92
104.48
39.44
19.72
124.20
206.83
331.03
3.10. Approved Capital Cost

3.10.1. The Capital Cost approved by the Commission as on COD is shown in Table 21
below:
Table 21 - Capital Cost approved by the Commission (Rs. Crore)
Sr.
No.
Particulars
Submitted by
Approved by the
VIPL
Commission
Land
85.36
85.36
BTG
790.12
790.12
BOP
1695.87
1695.87
Taxes and duties
179.00
179.00
Initial Spares
22.34
22.34
OSBL
36.03
36.03
Overheads
281.83
275.54
IDC & FC
563.85
524.81
Impact of FERV
350.75
331.03
10
Total Project cost as on COD
4005.15
3940.10
Page 50 of 99
3.10.2. Considering the foregoing analysis and approval of cost of land, BTG, BOP,
taxes and duties, initial spares, OSBL, overheads, IDC and FERV set out at
paras. 3.3 to 3.9, the Commission approves the capital cost of Rs. 3940.10 Crore
as against VIPLs claim of Rs. 4005.15 Crore.
3.11. Means of Finance

3.11.1. VIPL submitted that the overall equity infusion as on COD of the Project is Rs.
1165.58 Crore, which is 29.10% of the total Project cost of Rs. 4005.15 Crore. VIPL
added that, considering the large debt borrowing involved, loan syndication has been
opt for. The major loan was taken from a consortium of banks and financial
institutions led by Axis Bank, and a second loan through dollar denominated ECB.
To reduce IDC, VIPL has opted for part funding of foreign equipment supply by
buyers credit at an economical interest rate.
3.11.2. The Commission observes that, as on COD, the equity is Rs. 1165.58 Crore, which is
29.1% of the actual Project cost as on COD. VIPL submitted that the planned debtequity ratio was 70:30. The ECB loan and Buyers Credit sanctioned for the Project
was $150 million and $96 million respectively. VIPL infused up-front equity in the
Project in order to enable draw-down, and required equity infusions have been done
to maintain the debt-equity ratio. Whole most of the ECB and BC have been drawn in
the initial period, some of the BC matching the delivery of spares has been availed
just prior to COD of the Project in order to phase out the expenditure. The variation
in the exchange rate as on COD of the Project vis-a-vis that prevailing at the time of
draw-down of ECB and the BC drawals has resulted in reinstatement of ECB and BC
at a higher value whereas the equity value has not changed, being in Rupees. This has
resulted in to variation in the debt-equity ratio to 70.9:29.1 instead of 70:30.
3.11.3. To a query of the Commission, VIPL submitted that it does not envisage levy of any
liquidated damages since the delay is on account of factors not attributable to
contractors default.
Page 51 of 99
3.11.4. Regulation 30 of MERC MYT Regulations, 2011 specifies as follows:

30.1 For a project declared under commercial operation on or after April 1,
2011, if the equity actually deployed is more than 30% of the capital cost,
equity in excess of 30% shall be treated as normative loan for the Generating
Company, Transmission Licensee and Distribution Licensee:
Provided that where equity actually deployed is less than 30% of the capital
cost of the capitalised asset, the actual equity shall be considered for
determination of tariff."
3.11.5. Thus, if the equity deployed in capitalised assets is below 30%, the actual equity is to
be considered. The actual equity deployed by VIPL in capitalised project assets as on
COD is Rs. 1165.58 Crore, which is 29.58% (i.e. less than 30%) of the approved
capital cost of the Project as on COD.
3.11.6. The Commission approves the debt:equity ratio of 70.4:29.6 considering the
actual equity, in accordance with Regulation 30.1 of the MERC MYT
Regulations, 2011.
3.11.7. The means of finance approved by the Commission is as under:
Table 22 - Means of finance as approved by the Commission (Rs. Crore)
Sr. No.
Particulars
Equity
1165.38
Debt
2774.72
Capital cost as on COD
3940.10
Cost
Page 52 of 99
4.
DETERMINATION OF TARIFF FOR FY 2014-15 AND 2015-16
4.1.
Capital Cost for determination of tariff
4.1.1.
VIPL has submitted that Unit 1 achieved COD on 4 April, 2013, and Unit 2 on 28
March, 2014. Since the PPA for supply of power commences from 1 April, 2014,
VIPL has considered the depreciated cost of the project as on 31 March, 2014 for the
determination of tariff for FY 2014-15 and 2015-16.
4.1.2.
VIPL submitted that it has considered the overall value of the assets of the generating
station after deducting the depreciation on the assets till 31 March, 2014 as under:
Table 23 - Capital cost for determination of tariff, as submitted by VIPL
Sr. No.
Particulars
Project Cost as on 31 March, 2014
Depreciation since COD till 31 March, 2014
Capital cost for determination of tariff
Cost (Rs. Crore)

4005.20
81.22
3923.98
4.1.3.
The Commission observes that, in the audited accounts of VIPL, the assets pertaining
to transmission are also included. The Commission directed VIPL to submit the
reconciliation of assets details as submitted in the present Petition vis--vis the
audited accounts. VIPL confirmed that, in the audited accounts, transmission related
assets are booked only under two heads, viz. Transmission Line and Land for
Transmission. The other heads cover the cost of generation facilities only. The
Commission referred to the reconciliation statement at Form 4.1 of the Petition and
Schedule 5 of the audited accounts.
4.1.4.
In reply to the Commissions query regarding the difference in capital cost of the
project as on COD and as on 31 March, 2014, VIPL submitted that the overall
capitalisation as on 28 March, 2014 is Rs. 4005.15 Crore. An additional capitalisation
in the period from 28 March, 2014 (as on COD) to 31 March, 2014 of Rs. 5 Lakh has
Page 53 of 99
been taken on account of submersible pump required for the generating plant. Hence,
the Gross Fixed Assets (GFA) base as on 31 March, 2014 is Rs. 4005.20 Crore.
Accordingly, while working out the depreciated cost of the generating station (as on
1 April, 2014), VIPL has considered the opening GFA of the generating station as
Rs. 4005.20 Crore and accumulated depreciation as on 31 March, 2014 as Rs. 81.22
Crore.
4.1.5.
The Commission asked for the allocation of accumulated depreciation of Rs. 81.22
Crore to Unit 1 and Unit 2. The Commission observed that depreciation of Rs. 81.22
Crore has not been worked out based on the straight-line method rates specified in
the Regulations. VIPL submitted that the variation in depreciation amount is due to
difference in the number of days of operation to be considered based on the date of
capitalisation of assets.
4.1.6.
The Commission asked VIPL to confirm whether the capital cost as on COD is the
firm capital cost, or is subject to change in future except for additional capitalisation
mentioned in the Petition towards Railway siding, RO plant and spares. VIPL
submitted that the capital cost submitted as on COD of the Project is firm capital cost
and not subject to any change in future. The additional capitalisation may marginally
vary (lower or higher) from the envisaged expenditure depending on the actual time
of capitalisation of such expenses in FY 2014-15. It reiterated that additional
capitalisation is only towards development of Railway siding, RO plant and other
miscellaneous facilities and spares.
4.1.7.
The Commission has considered the Project cost of Rs. 3940.15 Crore, including
the capitalisation of Rs. 5 Lakh during the period from COD till 31 March,
2014. For the purpose of determination of tariff for FY 2014-15, the Commission
approves the capital cost of Rs. 3859.94 Crore, after deducting the depreciation
of Rs. 80.21 Crore from COD till 31 March, 2014, based on the average
depreciation rate of the assets capitalised corresponding to Unit 1 and Unit 2,
from the Project cost as on 31 March 2014.
Page 54 of 99
4.1.8.
The capital cost for determination of tariff as approved by the Commission is given
in Table 24 below:
Table 24 - Capital cost for determination of tariff approved by the Commission (Rs.
Crore)
4.2.
4.2.1.
Sr. No.
Particulars
Cost
Project Cost as on 31 March, 2014
3940.15
Depreciation since COD till 31 March, 2014
Capital cost for determination of tariff as on 1 April, 2014
80.21
3859.94
Additional Capitalisation
VIPL submitted that it has considered the additional capitalisation of Rs. 510.40
Crore in FY 2014-15 as follows:
Table 25 - Additional Capitalisation, as submitted by VIPL (Rs. Crore)
Sr. No.
Particulars
Railway Siding including corresponding pre-op expenses,

Govt. fees, overheads, IDC etc.
RO Plant which is under commissioning, and other misc.
Items
BTG and other Spares
422.00
Total
510.40
2
3
FY 2014-15
40.40
48.00
4.2.2.
Regulation 28 of the MERC MYT Regulations, 2011 specifies as under:

28.1 The following capital expenditure, actually incurred or projected to be
incurred, on the following counts within the original scope of work, after the
date of commercial operation and up to the cut-off date may be admitted by
the Commission, subject to the prudence check:
(a) Due to un-discharged liabilities within the original scope of work
(b) On works within the original scope of work, deferred for execution
(c) To meet award of arbitration and satisfaction of final and unappealable
order or decree of a court arising out of original capital cost,
(d) On account of change in law,
Page 55 of 99
(e) On procurement of initial spares included in the original project costs

subject to the ceiling norm laid down in Regulation 27.7;
(f) Any additional works/services, which have become necessary for efficient
and successful operation of a Generating Station or a transmission project but
not included in the original scope of work.
Provided that original scope of work along with estimates of
expenditure shall be submitted along with the application for provisional
tariff. Provided further that a list of the deferred liabilities and works deferred
for execution shall be submitted along with the application for final tariff after
the date of commercial operation of the Generating Unit/Station or
transmission system.
4.2.3.
The Commission notes that VIPL is in the process of installing the RO plant, which
is a new system required to comply with the MoEF directions to achieve zero effluent
discharge and an additional water pumping system.
4.2.4.
The Commission asked VIPL to submit details of spares to be capitalised during FY

2014-15. VIPL submitted the details of generator spares, ash handling plant spares,
BOP spares and C&I DCS spares which are to be capitalised in FY 2014-15. The
Commission observes that VIPL has proposed spares capitalisation of Rs. 70.34
Crore, including initial spares of Rs. 22.34 Crore capitalised as on the Project COD
and spares of Rs. 48 Crore to be capitalised during FY 2014-15. The capitalisation of
Initial spares is less than 2.5% of the Project cost approved in this Order, which is
within the limit specified in Regulation 27.7.
4.2.5.
During the TVS, the Commission had sought justification for the additional
capitalisation claimed in the Petition. VIPL submitted that it has proposed the
additional capitalisation for Railway siding and RO plant, being the un-discharged
liabilities within the original scope of the work, and procurement of initial spares in
line with Regulation 28 of MYT Regulations, 2011.
Table 26 - Additional Capitalisation, as submitted by VIPL (Rs. Crore)
Sr. Particulars
No.
1
Railway
Siding,
FY 2014-15
including
Justification
422.00 Un-discharged liabilities
Page 56 of 99
Sr. Particulars
FY 2014-15
No.
corresponding pre-op expenses,
Govt. fees, overheads, IDC etc.
2
RO Plant which is under
40.40
commissioning, and other misc.
items
3
BTG and other Spares
48.00
Total
4.2.6.
Justification
within the original scope
of work
Un-discharged liabilities
within the original scope
of work
Procurement of initial
Spares included in the
original project costs
510.40
The Commission directed VIPL to submit detailed breakup of estimation of

additional capitalisation towards the Railway siding, including corresponding preoperative expenses, Govt. fees, overheads, IDC, etc. for FY 2014-15. VIPL submitted
the break up as under:
Table 27 - Details of Railway siding cost, as submitted by VIPL (Rs. Crore)
Sr. No.
Particulars
Hard cost - railway siding ( as per EPC contract)
Overheads - Deposit works, Codal charges required to be
FY 2014-15
342.54
51.43
paid to Railways and royalties to Govt.

3
Corresponding IDC
Pre-operative expenses
Total for Railway siding

4.2.7.
27.23
0.80
422.00
As regards the status of the additional capitalisation, the Commission notes VIPLs
submission that most of the Railway siding work has been completed. The balance
work in a small patch of 0.7 Kms in SICOM land had been was pending due to nonavailability of land from SICOM. Based on the efforts made, GoM, vide GR No.
Misc./2011/P.K.85/A-1 has approved leasing of SICOM land on 23 April, 2014. The
work is in progress, and the Railway siding is expected to be operational by the end
August, 2014.
Page 57 of 99
4.2.8.
The Commission observed that there is a possibility of use of the Railway siding by
other users as the generating station is located in an industrial area. The Commission
notes the following reply from VIPL in this regard:
Railway siding facility with single track rail route is being implemented for
dedicated use by VIPLs Butibori Power Project for transportation of coal and
there is no sharing of this facility with any other entity.
In future, if requirement of sharing of these facilities by other entities comes
up and becomes feasible, then VIPL will inform the Honble Commission
regarding the same.
4.2.9.
With regard to the Railway siding, VIPL has entered into contract for the following
works:
(i)
Procurement and supply, on principal to principal basis, of materials and

equipments as per VIPLs requirements for railway line and associated
system;
(ii)
Construction of railway line and associated system;
(iii) Technical and expert services as per VIPLs requirement for railway line and
associated system.
The total fixed contract price was Rs. 273 Crore for supply, construction and services
for Railway siding works.
4.2.10. Subsequently, vide amendment dated 23 October, 2012, the scope of work was
enlarged for completion of the Project, and the contract price was increased for
additions as follows:
(i) Additional supplies and works: valued at Rs. 23.18 Crore
(ii) Change in technical specifications: valued at Rs. 46.35 Crore.
Hence, the contract price increased from Rs. 273 Crore to Rs. 342.54 Crore for
supply, construction and services for Railway siding works.
4.2.11. The Commission observes that the hard cost for Railway siding work as submitted by
VIPL is in accordance with the firm price contract.
4.2.12. The Commission approves the additional capitalisation of Rs. 510.40 Crore on a
provisional basis for the Railway siding, RO Plant and other BTG spares in
Page 58 of 99
accordance with Regulation 28.1 of the MERC MYT Regulations, 2011. The
Commission will accord final approval at the time of truing up of FY 2014-15,
subject to prudence check.
4.2.13. The Commission observes that the Railway siding is intended for dedicated use
of VIPL for the operation of its generating station. The capital cost of the
Railway siding has been approved by the Commission as additional
capitalisation for FY 2014-15 on a provisional basis. The Commission directs
VIPL to inform the Commission in case of sharing of the Railway siding with
other users in future.
4.2.14. The additional capitalisation as approved by the Commission is given in Table 28
below. The Commission has considered the additional capitalisation as being funded
with debt: equity ratio of 70.4:29.6.
Table 28 - Additional Capitalisation as approved by the Commission
4.3.
4.3.1.
Sr. No.
Particulars
FY 2014-15
Additional capitalisation for FY 2014-15
510.40
Debt (Rs. Crore)
359.44
Debt (%)
70.4%
Equity (Rs. Crore)
150.96
Equity (%)
29.6%
Depreciation
VIPL submitted that it has considered the opening GFA as the capital cost as on
COD of the Project. As it has considered the depreciated cost at the start of FY 201415 for the purpose of tariff computations, the accumulated depreciation, equal to
depreciation till 31 March, 2014 of Rs. 81.22 Crore, will not be charged to
consumers.
Page 59 of 99
4.3.2.
VIPL further submitted that it has classified its assets as per the depreciation
schedule in the MYT Regulations, 2011 and has applied the rates prescribed therein
for determining the depreciation for FY 2014-15 and FY 2015-16 as under:
Table 29 Depreciation, as submitted by VIPL (Rs. Crore)

Particulars
FY 2014-15
Depreciation
208.90
FY 2015-16
218.28
4.3.3.
The Commission has approved the opening GFA on pro-rata basis under various
heads in the same proportion as submitted by VIPL, and also the additional
capitalisation under the other heads as submitted by VIPL. The Commission observes
that VIPL has claimed depreciation on the opening GFA as well as the additional
capitalisation during the year.
4.3.4.
Regulation 31.2
of the MYT Regulations, 2011 stipulates that the Generation
Company shall be permitted to recover depreciation on the value of Fixed Assets, and
that it shall be computed annually based on the straight-line method at the specified
rates.
4.3.5.
Regulation 31.5 stipulates that, in case of projected commercial operation of the

assets for part of the year, depreciation shall be calculated based on the average of
opening and closing value of assets approved by the Commission.
4.3.6.
The Commission approves the depreciation on opening GFA for the full
operational period, and on additional capitalisation considering the average of
opening and closing value of assets based on the rates of depreciation for various
classes of assets as per the MERC MYT Regulations, 2011. Accordingly, the
Commission approves depreciation of Rs. 205.66 Crore for FY 2014-15 and Rs.
215.04 Crore for FY 2015-16.
Page 60 of 99
4.3.7.
The depreciation approved for FY 2014-15 and FY 2015-16 is set out in Table 30
below:
Table 30 - Depreciation as approved by the Commission (Rs. Crore)
Particulars
FY 2014-15
Depreciation
4.4.
FY 2015-16
205.66
215.04
Interest on Long term Loan
4.4.1. VIPL submitted that it has considered funding of additional capitalisation post-COD
of the Project in a manner such that the overall normative debt: equity ratio is aligned
to the norm of 70:30. VIPL has determined the interest on long term loans considering
the outstanding loan balances against the depreciated value of the Project.
4.4.2.
VIPL submitted that interest is calculated in line with the MYT Regulations, 2011.
The repayment of loan for FY 2014-15 and 2015-16 is assumed to be equal to
depreciation for the respective years. The interest rate applied on the normative loan
amount is computed as the weighted average of interest on the basis of the actual
loan portfolio at the beginning of the year, as under:
Table 31 - Computation of Interest Rate, as submitted by VIPL
Particulars
Units
FY 2014-15
FY 2015-16
Actual Domestic loan

Opening domestic loan
Rs. Crore
1480.23
1941.27
Addition
Rs. Crore
647.22
0.00
Repayment
Rs. Crore
186.18
245.02
Closing domestic loan
Rs. Crore
1941.27
1696.25
Interest rate on domestic loan
13.75%
13.75%
Actual ECB
Opening ECB outstanding
Rs. Crore
772.71
643.93
Repayment
Rs. Crore
128.78
128.78
Closing ECB outstanding
Rs. Crore
643.93
515.14
Interest rate on ECB
5%
5%
Buyers credit
Page 61 of 99
Particulars
Units
FY 2014-15
FY 2015-16
Opening outstanding
Rs. Crore
325.17
0.00
Repayment
Rs. Crore
325.17
0.00
Closing outstanding
Rs. Crore
0.00
0.00
Interest rate on Buyers credit
1.9%
1.9%
Average Interest Rate
9.63
11.57%
4.4.3. VIPL submitted the interest expenses for FY 2014-15 and FY 2015-16 as under:
Table 32 - Interest expenses, as submitted by VIPL (Rs. Crore)
Particulars
FY 2014-15
Interest expenses
FY 2015-16
273.44
322.36
Treatment of Cost of hedging foreign loans and/ or allowing the FERV

4.4.4.
In its provisional Tariff Order dated 17 January, 2014 in Case No. 91 of 2013, the
Commission had directed VIPL to submit the various options to protect the risk
arising from FERV in the period after COD, and the cost of doing so along with their
impact on tariff.
4.4.5.
VIPL submitted that it has examined the following scenarios for the treatment of
FERV/hedging cost, and the impact on per unit interest cost is shown in Table 33
below:
Table 33 - Scenarios for hedging cost, as submitted by VIPL (Rs. Crore)
Scenario Per unit
Levelised
FY
FY
FY
FY
FY
interest and FERV cost
for loan
2014-
2015-
2016-
2017-
2018 2019-
(Rs/Kwh)
tenure
15
16
17
18
-19
No hedging Exchange
rate @ Rs. 60.10 per
US$
No hedging Exchange
rate @ Rs. 55 per US$
FY
20
0.69
0.67
0.79
0.74
0.69
0.64
0.60
0.68
0.67
0.77
0.72
0.67
0.62
0.57
Page 62 of 99
Scenario Per unit
Levelised
FY
FY
FY
FY
FY
interest and FERV cost
for loan
2014-
2015-
2016-
2017-
2018 2019-
(Rs/Kwh)
tenure
15
16
17
18
-19
No hedging Exchange
0.73
rate @ Rs. 70 per US$
Entire ECB is converted
to Rupee Loan on similar 0.78
terms
ECB is hedged based on
offers received from
0.78
banks
4.4.6.
FY
20
0.67
0.84
0.79
0.73
0.69
0.64
0.67
0.94
0.87
0.79
0.72
0.65
0.67
0.94
0.87
0.79
0.72
0.64
VIPL requested the Commission for guidance with regard to the treatment of
FERV/hedging cost for the period post COD of the Project.
4.4.7.
Regulation 27.1 of the MERC MYT Regulations, 2011 specifies as under:

27.1 Capital cost for a project shall include:
(a) the expenditure incurred or projected to be incurred, including interest
during construction and financing charges, any gain or loss on account of
foreign exchange risk variation on the loan during construction up to the
date of commercial operation of the project, as admitted by the Commission,
after prudence check;
(b) capitalised initial spares subject to the ceiling rates specified in this
Regulation; and
(c) additional capital expenditure determined under Regulation 28:
4.4.8.
The Commission notes that the Regulations specify the treatment of FERV upto the
Project COD, but not thereafter. In the provisional Tariff Order dated 17 January,
2014 in Case No. 91 of 2013, the Commission had directed as follows:
4.6.26 The risk arising from foreign exchange rate variation needs to be
studied in more detailed manner. The provisions of existing MERC MYT
Regulations, 2011 do not deal with the issue. The Commission directs VIPL to
study the various options to protect the risk arising from Foreign exchange
rate variation in future period after COD and the cost of doing so along with
the possible impact of this cost on tariff and submit the same to the
Commission. The Commission shall take appropriate view on the same.
Page 63 of 99
4.4.9.
VIPL has accordingly submitted the impact on per unit interest cost in various
scenarios. The Commission also asked VIPL to submit the impact on ARR heads
with and without hedging cost. VIPL submitted the following:
Table 34 - Impact of hedging on ARR heads, as submitted by VIPL (Rs. Crore)
Particulars
Interest on Long term loan
FY 2014-15
FY 2015-16
Without
With
Without
With
hedging
Hedging
Hedging
Hedging
273.44
273.44
322.36
382.04
Interest on Working capital
57.10
57.10
60.59
62.10
4.4.10. The Commission notes VIPLs submission that it has not entered into any hedging
arrangement with respect to foreign currency loans and that, while consequently the
present Petition does not consider impact of hedging, VIPL would file a separate
Petition on the treatment of FERV for consideration by the Commission.
4.4.11. VIPL has since filed a separate Petition before the Commission for removal of
difficulty in treatment of FERV/hedging cost of foreign borrowings for the period
post COD of the generating station.
4.4.12. In light of the foregoing, the Commission will deal with the issue of treatment of
FERV/hedging cost for the period post COD of the generating station in the
separate Petition filed by VIPL. In the present Order, the Commission has
determined the tariff without considering the impact of the FERV/hedging cost
for the period post COD.
4.4.13. As regards interest on long term capital, Regulation 33 of MERC MYT Regulations,
2011 specifies as under:
33 Interest on loan capital 33.1 The loans arrived at in the manner indicated in Regulation 30 shall be
considered as gross normative loan for calculation of interest on loan.
Page 64 of 99
Provided that in case of retirement or replacement of assets, the loan

capital approved as mentioned above, shall be reduced to the extent of 70%
(or actual loan component based on documentary evidence, if it is higher than
70%) of the original cost of the retired or replaced assets.
33.2 The normative loan outstanding as on April 1, 2011, shall be worked out
by deducting the cumulative repayment as admitted by the Commission up to
March 31, 2011, from the gross normative loan.
33.3 The repayment for the year of the tariff period FY 2011-12 to FY 2015-16
shall be deemed to be equal to the depreciation allowed for that year:
33.4 Notwithstanding any moratorium period availed by the Generating
Company or the Transmission Licensee or the Distribution Licensee, as the
case may be, the repayment of loan shall be considered from the first year of
commercial operation of the project and shall be equal to the annual
depreciation allowed,
33.5 The rate of interest shall be the weighted average rate of interest
calculated on the basis of the actual loan portfolio at the beginning of each
year applicable to the Generating Company or the Transmission Licensee or
the Distribution Licensee:
Provided that if there is no actual loan for a particular year but
normative loan is still outstanding, the last available weighted average rate of
interest shall be considered:
Provided further that if the Generating Company or the Transmission
Licensee or the Distribution Licensee, as the case may be, does not have
actual loan, then the weighted average rate of interest of the Generating
Company or the Transmission Licensee or the Distribution Licensee as a
whole shall be considered.
33.6 The interest on loan shall be calculated on the normative average loan of
the year by applying the weighted average rate of interest.
4.4.14. The Commission has considered the weighted average rate of interest as submitted by
VIPL.
Page 65 of 99
4.4.15. The Commission approves interest on long term loan capital of Rs. 269.25 Crore
for FY 2014-15 and Rs. 319.87 Crore for FY 2015-16, in accordance with
Regulation 33 of the MERC MYT Regulations, 2011.
4.4.16. The interest on long term loan capital as approved by the Commission is shown in
Table 35 below:
Table 35 - Interest expenses as approved by the Commission (Rs. Crore)
Particulars
Opening balance of loan
2872.05
359.44
205.66
215.04
Closing balance
2872.05
2657.01
Average balance
2795.16
2764.53
Interest rate (%)
9.63%
11.57%
Interest on long term loan capital
269.25
319.87
capitalisation
Repayment of the loan
4.5.1.
FY 2015-16
2718.27
Addition of loan pertaining to additional
4.5.
FY 2014-15
Return on Equity
VIPL submitted that it has computed the Return on Equity (RoE) as per Regulation
32.1.1 of the MERC MYT Regulations 2011 on the equity capital determined in
accordance with Regulation 30 at the rate of 15.5 per cent per annum.
4.5.2.
VIPL submitted that Annexure III of the Regulations specifies the time-lines for
additional return of 0.5% as under:
2. The time schedule has been indicated in months in the following
paragraphs and tables:
Thermal Power Projects:
Coal/Lignite Power Plant:
Unit size 200/210/250/300/330 MW and 125 MW CFBC technologies:
(a) 33 months for first Unit of green field projects. Subsequent Units at an
Page 66 of 99
4.5.3.
VIPL submitted that it has achieved the following milestones for the project:
-
Notice to proceed to EPC contractor for Unit 1- 27 February, 2010

(signifying the financial commitment)
Readiness for Commercial Operation (i.e. full load operation) for Unit
1 17 August, 2012
Readiness for Commercial Operation (i.e. full load operation) for Unit
2 19 March, 2013
4.5.4.
VIPL submitted that, since the Project was ready for commercial operation within the
time-lines prescribed, it qualifies for the additional RoE of 0.5%.
4.5.5.
VIPL submitted that delay in the actual COD was due to the non-availability of
linkage of coal from CIL. Further, there had been difficulties in transfer of SICOM
land and Railways approval for development of the Railway siding. VIPL has
received the licence for Railway siding on 4 January, 2014 and related works have
started. Despite these constraints, VIPL was able to transport the coal by road and
achieved COD of the Units in April, 2013 and March, 2014, respectively.
4.5.6.
VIPL has submitted the RoE considering the rate of return of 16% as under:
Table 36 - Return on Equity, as submitted by VIPL (Rs. Crore)
Particulars
Return on Equity
FY 2014-15
182.71
FY 2015-16
212.85
4.5.7.
The Commission notes that VIPL has considered the additional rate of RoE of 0.5%
on commissioning of the Project earlier than the time-line specified in the
Regulations, i.e., 33 months. The Commission observes that VIPL has considered the
time-line upto the COD readiness. However, the Project completion shall be
considered as the COD of the plant only. VIPL issued NTP to the EPC contractor on
27 February, 2010 for Unit 1 and 30 April, 2010 for Unit 2, and achieved COD on 4
Page 67 of 99
April, 2013 for Unit 1 and on 28 March, 2014 for Unit 2. Accordingly, the
Commission has computed the time schedule for the commissioning as under:
Table 37 - Time schedule for commissioning computed by the Commission
Particulars
Unit 1
Notice to Proceed
4.5.8.
Unit 2
27 February, 2010
30 April, 2010
COD declared
4 April, 2013
28 March, 2014
Time required
1132 days (37 Months 8 days)
1428 days(46 months 28 days)
Regulations 32.1 of the MYT Regulations, 2011 specifies as under:

32.1.1 Return on equity capital shall be computed on the equity capital
determined in accordance with Regulation 30 at the rate of 15.5 per cent per
annum in Indian Rupee terms:
Provided that in case of projects commissioned on or after 1st April, 2011, an
additional return of 0.5% shall be allowed if such projects are completed
within the timeline specified in Annexure-III:
Provided further that the additional return of 0.5% shall not be admissible if
the project is not completed within the timeline specified above for reasons
whatsoever.
4.5.9.
The Commission observes that VIPL has not completed the Project within the
time-line specified in AnnexureIII of the MERC MYT Regulations, 2011, i.e.,
33 months for the first Unit, and within an interval of 4 months for the second
Unit. The Regulations specify that, if the project is not completed within the
time-line for whatever reason, no additional return shall be admissible.
Accordingly, the Commission rules that no additional RoE, as claimed by VIPL,
is admissible.
4.5.10. The Commission approves the RoE of Rs. 179. 49 Crore for FY 2014-15 and Rs.
202.89 Crore for FY 2015-16, at the rate of 15.5% specified in the Regulations
on the opening equity capital.
Page 68 of 99
4.5.11. The RoE approved by the Commission is shown in Table 38 below:

Table 38 Return on Equity approved by Commission (Rs. Crore)
Particulars
Opening equity
FY 2015-16
1157.98
1308.94
150.96
1308.94
1308.94
Rate of return
15.5%
15.5%
Return on Equity on opening equity
179.49
202.89
Total Return on Equity
179.49
202.89
Equity toward additional capitalisation

Closing Equity
4.6.
FY 2014-15
Income Tax
4.6.1. VIPL submitted that it has projected the Income Tax liability in accordance with
various judgments of ATE. Vide its Judgment dated 15 February, 2011 in Appeal No
174 of 2009, the ATE held that Income Tax, for the purpose of determination of ARR
(i.e. when only projected expenses and income are available), should be allowed after
grossing up the RoE. However, in case of truing-up, when actual expenses and
income are available, the ATE held that the Regulatory Profit before Tax should be
determined considering all allowable expenses and income, and that Income Tax
should be permitted on the same. The relevant part of the Judgment reads as below:
11. The issue of income tax relates to the fact that the State Commission
deals with regulatory accounts of each licensed business. The State
Commission is required to adjust the regulatory accounts income to the
taxation accounts. This could be done in 2 alternative methods. One by Profit
Before Tax method and second by the method of Return on Equity. Profit
Before Tax method is followed while truing up as details of all the elements
are available by then. The second method is followed while submitting the
details for APR or for tariff determination, as all adjustment details are not
available at the point of submission. Therefore, for truing up, the Appellant
has estimated the income tax liability by using the first method. While the State
Commission has attempted to follow the first method, it has wrongly taken
Return on Equity as profit before tax instead of computing the regulatory
profit before tax by the method of revenue permissible expenses
Page 69 of 99
18. While the State Commission has computed the tax by considering the
Return on Equity equal to profit before tax, it has ignored the fact that such
allowed income tax would also be considered as revenue gains and the
Appellant would have to pay tax on the same. In order to rectify the same, the
State Commission ought to have grossed up the tax computed by it and pass
the same to the Appellant.
4.6.2. VIPL submitted that the above ruling was reiterated by the ATE in Judgment dated 28
November 2013 in Appeal Nos. 104, 105 and 106 of 2012, wherein ATE has allowed
Income Tax based on regulatory income computed with permissible profits rather than
actual taxable income:
55. However, a careful analysis of the above example with the ratio of the
Judgment in Appeal No. 174 of 2009 would reveal that this Judgment is
specifying tax allow ability for regulated business only and does not in any
manner deal with implications on tax for regulated business due to other
businesses. Further, the ratio is with regard to tax liability on the regulatory
income, computed with permissible profits and applicable tax depreciation to
be considered as taxable income, and not on the actual taxable income.
Hence, any notional or actual income even within regulated business that is
not permissible to be considered as regulatory taxable income cannot be
allowed as it would amount to allowance of more than warranted regulatory
tax liability/profits.
4.6.3. Accordingly, VIPL computed the Income Tax based on grossed up RoE adjusted with
the Minimum Alternate Tax (MAT) rate of 20.96% as under:
Table 39 - Income Tax as submitted by VIPL (Rs. Crore)
Particulars
Income Tax
FY 2014-15
48.45
FY 2015-16
56.44
4.6.4.
The Commission observes that the ATE Judgements cited by VIPL are relevant to
Orders issued by the Commission under the provisions regarding Income Tax
specified in the MERC (Terms and Conditions of Tariff) Regulations, 2005 and not
the subsequent MERC MYT Regulations, 2011.
Page 70 of 99
4.6.5.
As regards Income Tax, Regulation 34.1 of the MERC MYT Regulations, 2011
specifies as under:
34.1 The Commission, in its MYT Order, shall provisionally approve Income
Tax payable for each year of the Control Period, if any, based on the actual
income tax paid on permissible return as allowed by the Commission
relating to the electricity business regulated by the Commission, as per latest
Audited Accounts available for the applicant, subject to prudence check:
Provided that no Income Tax shall be considered on the amount of efficiency
gains and incentive earned by the Generating Companies, Transmission
Licensees and Distribution Licensees.
Provided further that the Generating Company, Transmission Licensee and
Distribution Licensee shall bill the Income Tax under a separate head called
"Income Tax Reimbursement" in their respective bills.
4.6.6.
The Commission notes that the
Regulations of 2011 specify that Income Tax
payable shall be provisionally approved based on the actual Income Tax paid and as
per the latest available audited accounts. The Commission also observes that no
Income Tax has been paid for FY 2013-14 for which audited accounts have been
submitted by VIPL.
4.6.7.
The Commission observes that no Income Tax has been paid for the previous
financial year. The Commission has not approved the provisional Income Tax
payable by VIPL for FY 2014-15 and FY 2015-16, as per Regulation 34.1 of the
MERC MYT Regulations, 2011.
4.7.
Operation and Maintenance (O&M) Expenses
4.7.1. VIPL submitted that it has considered the normative O&M expenses as specified in
Regulation 46 (a) of the MERC MYT Regulations, 2011. As per these Regulations,
per MW O&M expenses for newly commissioned stations for FY 2014-15 and FY
2015-16 are Rs 17.50 lakhs/MW and Rs.18.50 lakhs/MW respectively. VIPL
submitted the O&M expenses as under:
Page 71 of 99
Table 40 - O&M Expenses as submitted by VIPL

Particulars
FY 2014-15
Capacity (MW)
FY 2015-16
600
600
Norms (Rs. Lakh per MW)
17.50
18.50
O&M expenses (Rs. Crore)
105.00
111.00
4.7.2.
Regulation 46 specifies the norms for O&M Expenses for new generating station as
follows:
46 New Generating Stations:
a) For Coal based Generating Stations:
Rs. Lakh/MW
Particulars
FY 2011-12
FY 2012-13
FY 2013-14
FY 2014-15
FY 2015-16
200/210/250 MW
Sets
14.81
15.66
16.55
17.50
18.50
500 MW and
above Sets
13.32
14.08
14.89
15.74
16.64
Note: For the Generating Stations having combination of 200/210/250

MW sets and 500 MW and above sets, the weighted average value for
operation and maintenance expenses shall be adopted.
4.7.3.
The Regulations do not provide norms for 300 MW generating sets. In its Petition,
VIPL has considered the norms for 200/210/250 MW sets.
4.7.4.
The Commission has considered the norms for O&M expenses of 200/210/250 MW
sets as provided in Regulation 46 in the absence of any specific norm for such
expenses for 300 MW sets in the Regulations.
4.7.5.
The Commission approves the O&M expenses of Rs. 105 Crore for FY 2014-15
and Rs. 111 Crore for FY 2015-16 taking into account the norms for generating
sets of 250 MW capacity specified in Regulation 46 of the MERC MYT
Regulations, 2011 in the absence of norms for 300 MW capacity sets.
Page 72 of 99
4.7.6.
The O&M expenses approved by the Commission are as under:

Table 41 - O&M Expenses as approved by the Commission (Rs. Crore)
Particulars
FY 2014-15
O&M expenses (Rs. Crore)
4.8.
4.8.1.
105.00
FY 2015-16
111.00
Non- tariff Income

VIPL has not submitted any non-tariff income for FY 2014-15 and FY 2015-16.
4.8.2.
The Commission asked VIPL to provide justification for not considering the nonTariff income from sale of fly ash, etc. VIPL submitted that since the Project has
recently commenced operations, it does not envisage revenue from sale of fly ash,
sale of scrap, interest on loans to employees or interest accrued from securities, etc.
at this stage. However, in the real time operations of the plant, if any such revenue is
realised, details would be submitted at the time of truing up.
4.8.3.
VIPL has not considered any non-tariff income as the Project has commenced
operations only recently. The Commission directs VIPL to submit details of
non-Tariff income, if any, for FY 2014-15 and 2015-16 at the time of truing up
for those years.
4.9.
Interest on Working Capital
4.9.1. VIPL submitted that the working capital has been computed in line with Regulation
35.1 of MERC MYT Regulations, 2011. The short-term Prime Lending Rate (PLR) of
State Bank of India (SBI) as on the date of filing of the Petition, i.e. 14.75%, has been
considered for computation of interest on working capital.
4.9.2. VIPL submitted the computation for interest on working capital for FY 2014-15 and
FY 2015-16 as under:
Table 42 - Interest on Working Capital, as submitted by VIPL (Rs. Crore)
Particulars
Cost of Coal/ Lignite
FY 2014-15
121.87
FY 2015-16
122.12
Page 73 of 99
Particulars
FY 2014-15
FY 2015-16
Cost of Secondary Fuel Oil
3.94
3.96
O&M expenses
8.75
9.25
40.05
45.16
275.44
293.35
62.91
63.04
Working Capital Requirement
387.15
410.80
57.10
60.59
Maintenance spares
Receivables
Less: Payable for fuel
4.9.3.
Regulation 35.1 of the MERC MYT Regulations, 2011 specifies the computation of
Interest on Working Capital as under:
35.1 Generation:
(a) In case of coal based/oil-based/lignite-fired Generating Stations, working
capital shall cover:
(i) Cost of coal or lignite for one and half months (1) for pit-head
Generating Stations and two (2) months for non-pit-head Generating Stations,
corresponding to target availability;
(ii) Cost of oil for two (2) months corresponding to target availability;
(iii) Cost of secondary fuel oil for two (2) months corresponding to target
availability;
(iv) Operation and Maintenance expenses for one (1) month;
(v) Maintenance spares at one (1) per cent of the historical cost; and
(vi) Receivables for sale of electricity equivalent to two (2) months of the sum
of annual fixed charges and energy charges calculated on target availability;
minus
(vii) Payables for fuel (including oil and secondary fuel oil) to the extent of
one (1) month of the cost of fuel calculated on target availability...
(e) Rate of interest on working capital shall be on normative basis and shall
be equal to the State Bank Advance Rate (SBAR) of State Bank of India as on
the date on which the application for determination of tariff is made.
4.9.4.
The Commission notes that, while computing the working capital requirement, VIPL
has considered Income Tax as part of the annual Fixed Charges. However, in
accordance with Regulation 40, Income Tax is not considered as part of the Annual
Page 74 of 99
Fixed Charges. Accordingly, computation of receivables elements of Annual Fixed

Charges as specified in the Regulations will be considered.
4.9.5.
The Commission has computed the Interest on Working Capital as per Regulation
35.1 of the MERC MYT Regulation, 2011.. The Commission has considered the
State Bank Advance Rate (SBAR) of SBI of 14.75% as on the date of filing of the
present Petition, as per the Regulations.
4.9.6.
The Commission approves Interest on Working Capital amounting to Rs. 55.52

Crore for FY 2014-15 and Rs. 58.68 Crore for FY 2015-16 in accordance with
Regulation 35.1 of the MERC MYT Regulations, 2011.
4.9.7.
The Interest on Working capital approved by the Commission is as under:
Table 43 - Interest on Working Capital as approved by the Commission (Rs. Crore)

Particulars
Cost of Coal/ Lignite
FY 2014-15
FY 2015-16
121.87
122.12
Cost of Secondary Fuel Oil
3.94
3.96
O&M expenses
8.75
9.25
39.40
44.51
265.32
281.01
62.19
63.04
376.38
397.80
14.75%
14.75%
55.52
58.68
Maintenance spares
Receivables
Less: Payable for fuel
Working Capital Requirement
Interest rate (%)
4.10. Annual Fixed Charges

4.10.1. VIPL has submitted the Annual Fixed Cost as under:
Table 44 - Annual Fixed Cost as submitted by VIPL (Rs. Crore)
Particulars
Depreciation
FY 2014-15
208.90
FY 2015-16
218.28
Page 75 of 99
Particulars
FY 2014-15
FY 2015-16
Operations & Maintenance Expenses
105.00
111.00
Interest on Long Term Loan
273.44
322.36
57.10
60.59
182.71
212.85
48.45
56.44
875.61
981.52
Return on Equity Capital

Income Tax
Annual Fixed Cost
4.10.2. The Commission observes that VIPL has considered the Income Tax as part of the
Annual Fixed Cost. Regulation 40 of the MERC MYT Regulations, 2011 specifies
the components of Annual Fixed Charges as under:
40.1 Components of Annual Fixed charges
The Annual Fixed Charges shall comprise of the following elements:
(a) Return on Equity Capital;
(b) Interest on Loan Capital;
(c) Depreciation;
(d) Operation & Maintenance Expenses;
(e) Interest on Working Capital;
Less: (a) Non Tariff Income.
Provided that Depreciation, Interest on Loan Capital and Return on Equity
Capital for Thermal and Hydro Generating Stations shall be considered in
accordance with the provisions specified in Part E of these Regulations.
4.10.3. The above Regulation does not include Income Tax as part of Annual Fixed Charges.
The Commissions ruling regarding the treatment of Income tax has already been
discussed in Section 4.6.
4.10.4. The Commission has considered the Annual Fixed Charges as per the Regulations,
and approves them as under:
Table 45 - Annual Fixed Charges as approved by the Commission (Rs. Crore)
Particulars
Depreciation
FY 2014-15
205.66
FY 2015-16
215.04
Page 76 of 99
Particulars
FY 2014-15
FY 2015-16
Operations & Maintenance Expenses
105.00
111.00
Interest on Long Term Loan
269.25
319.87
55.52
58.68
179.49
202.89
Less: Non-tariff Income
0.00
0.00
Annual Fixed Charges
814.91
907.47
Return on Equity Capital
4.11. Fuel Supply Agreement

4.11.1. VIPL submitted that it has considered domestic coal as the primary fuel for
generation of power. The quantum of coal required for achieving normative PLF
(85%) for a 600 MW generating station is around 2.29 MTPA. VIPL had received
Letter of Assurance (LoA) from WCL for supply of 2.345 MTPA of coal with Gross
Calorific Value (GCV) band of G-9.
4.11.2. VIPL submitted that its generating station is no exception to the ongoing coal crisis
in the country affecting almost all coal based generating stations. In order to meet the
coal requirements, VIPL has made significant efforts to execute FSAs with WCL.
Since the LOAs issued by WCL had assured the supply of coal at the notified price,
VIPL had requested WCL to execute the FSA assuring supply of coal at that price.
However, WCL refused to offer coal at the notified price citing absence additional
production of coal at the notified coal sources. Instead, it offered to sign FSA along
with a Side Agreement offering coal from WCLs cost-plus mines. Therefore, VIPL
was left with no option but to sign the FSA for Unit 2 for 1.11 MTPA on 10 March
2014 with WCL along with a Side Agreement.
4.11.3. VIPL stated that it was obliged to sign the Side Agreement as WCL refused to sign
FSA with any new power sector consumers with valid linkage and covered in the
Presidential Directive issued by the MoC to CIL for signing of FSA, including the
National Thermal Power Corporation (NTPC), at the notified price due to continuous
reduction in supply from notified price sources and considering availability of coal
from cost-plus sources.
Page 77 of 99
4.11.4. VIPL submitted that coal from cost-plus sources is available at higher price vis--vis
the notified price, resulting in severe resistance from buyers. Consequently, it is
understood that WCL has approached MoC /CIL proposing that coal from all its
sources (i.e., notified price mines and cost-plus mines) be pooled and sold to all
consumers at the pooled price. It appears that this pooling proposal is under active
consideration of MoC. Once the pooling proposal is implemented, Side Agreements
would be appropriately modified and the landed cost of coal from WCL to VIPL, for
Unit 2, will reduce significantly.
4.11.5. VIPL submitted that it has a valid LOA from WCL for supply of coal under FSA for
Unit 1, which is expected to be signed in due course. The Standing Linkage
Committee - Long Term (SLC-LT) has already approved conversion of Unit 1 from
GCPP to IPP at its meeting on 12 February, 2014. VIPL has complied with the
necessary documentation required by WCL confirming achievement of all milestones
enabling signing of FSA.
4.11.6. VIPL has made significant efforts for the transfer of linkage for Unit 1 from WCL to
some other coal Company supplying coal at the notified price, citing precedents
where this was done by CIL for other consumers earlier linked to WCL, and also that
VIPL is a Project with 100% exposure to WCL.
4.11.7. The Commission directed VIPL to submit the status of coal supply agreements for
Units 1 and 2 and a detailed note on the coal procurement for these Units in order to
achieve the variable cost estimated in the Petition. VIPL submitted that the FSA for
Unit 2 for 1.11 MTPA was signed with WCL on 10 March, 2014 along with a Side
Agreement. Under the FSA, the supply of coal has started at the cost-plus price from
October, 2014.
4.11.8. VIPL has submitted that, though the Letter of Assurance (LOA) was for the supply of
coal at the WCL notified price, it was compelled to sign the FSA and the Side
Page 78 of 99
Agreement for coal from cost-plus sources at the cost-plus price. WCL had refused to
sign the FSA at notified price with any new consumer. However, in its Order dated
27 October, 2014 in the matter of M/s Wardha Power Co. Ltd. (Case No. 88 of
2013), the Competition Commission of India (CCI) has questioned the cost-plus
pricing methodology of WCL, which has been asked to rework it. Accordingly,
WCLs coal prices are expected to reduce substantially.
4.11.9. As regards the FSA for Unit 1, VIPL submitted that the conversion of Unit 1 from
GCPP to IPP was approved by the SLC-LT at its meeting on 12 February, 2014.
With WCLs insistence for signing of FSA for coal supply for Unit 2 at cost-plus
price, VIPL made efforts to transfer the LOA of Unit 1 to South Eastern Coalfields
Ltd. (SECL) from WCL.
4.11.10. VIPL has submitted that, based on these efforts, the transfer of linkage of Unit 1 from
WCL to SECL, assuring supply of coal at notified price, has been approved by CIL
on 11 November, 2014. Once the FSA with SECL for supply of coal for Unit 1 is
executed, which is expected by January, 2015, and with the commencement of coal
supply at notified price from February, 2015 onwards, the landed cost of coal to
VIPL will come down further.
4.11.11. The Commission observes that VIPL has signed FSA on 10 March, 2014 for
supply of coal to Unit 2. However, the FSA for Unit 1 has not yet been signed .
VIPL should continue efforts to expedite the execution of the FSA so as to
ensure the availability of linkage coal for Unit 1.
4.12. Calorific Value and Price of Fuel

4.12.1. VIPL submitted that, considering the fuel availability, the overall Calorific Value and
expected landed price of domestic coal and secondary oils for FY 2014-15 and 201516 are as under:
Page 79 of 99
Table 46 - Calorific Value and Price of Fuel, as submitted by VIPL

FY 2014-15
FY 2015-16
Calorific
Landed
Calorific
Landed
Value
Price
Value
Price
(KCal/kg)
(Rs/MT)
(KCal/kg)
(Rs/MT)
Raw Coal from SECL
4,750
2,438
4,750
2,438
Cost-Plus Coal
4,534
3,975
4,534
3,975
FO
10,400
47,836
10,400
47,836
LDO
10,700
64,972
10,700
64,972
Particulars
4.12.2. VIPL submitted that the supply of coal for Unit 2 has been considered from WCL
cost-plus mines (grade G9) for the Annual Coal Quantity (ACQ) as per the FSA. For
Unit 1, the supply of coal has been considered from SECL. The price has been
considered for supply of G9 grade (GCV 4600-4900 kcal/kg) of coal. VIPL also
submitted the detailed computations of landed price of fuel.
4.12.3. VIPL submitted that the prices of oil are based on actual oil received from Hindustan
Petroleum Corporation Ltd. (HPCL) in April, 2014.
4.12.4. VIPL submitted that the Commission, vide its Order in Case No 91 of 2013, has not
considered any escalation in fuel charges. Accordingly, VIPL has not considered the
escalation in fuel prices. VIPL submitted that any deviation from the estimated fuel
price would be recovered through the Fuel Adjustment Cost (FAC) mechanism in
accordance with the MYT Regulations. .
4.12.5. The Commission observes that the basic cost of coal has been considered by VIPL as
per CILs notification for the respective Calorific values. The Commission asked
VIPL to submit reconciliation of freight charges considered for coal supply from
WCL and SECL. VIPL submitted that, for the freight charges, it has considered the
Deepika mine rail loading facility of SECL as the loading point and the Butibori
Page 80 of 99
power plant as the delivery point. Accordingly, the distance of 577 km has been
considered for transportation of coal from SECL mines. VIPL has considered the
Wani mine of WCL as the loading point, and the distance of 150 km to the Butibori
plant has been considered for transportation of coal from WCL. The Commission has
referred to the freight charges computations and relevant documents submitted by
VIPL. The Commission notes that VIPL has submitted freight charges of Rs.
978/MT for SECL coal and Rs. 405/MT for WCL coal.
4.12.6. For the computation of Energy Charge for FY 2014-15, the Commission has
considered the landed price of all fuels as submitted by VIPL. The landed price
and Calorific Value considered by the Commission is shown in Table 47 below:
Table 47 - Calorific Value and Price of Fuel considered by the Commission
FY 2014-15
FY 2015-16
Calorific
Landed
Calorific
Landed
Value
Price
Value
Price
(KCal/kg)
(Rs/MT)
(KCal/kg)
(Rs/MT)
Raw Coal from SECL
4,750
2,438
4,750
2,438
Cost-plus Coal
4,534
3,975
4,534
3,975
FO
10,400
47,836
10,400
47,836
LDO
10,700
64,972
10,700
64,972
Particulars
4.13. Operational Parameters

4.13.1. VIPL submitted the operational parameters as below:
Table 48 - Operational Parameters, as submitted by VIPL
Particulars
Installed Capacity
Units
FY 2014-15
FY 2015-16
MW
600
600
Availability
85%
85%
PLF
85%
85%
MU
4,468
4,480
Gross Generation
Page 81 of 99
Particulars
Auxiliary Consumption
Net Generation
Station Heat Rate
Specific Oil Consumption
Units
FY 2014-15
FY 2015-16
9.00%
9.00%
MU
4,066
4,077
kCal/kWh
2,401
2,401
ml/kWh
1.00
1.00
4.13.2. VIPL submitted that, for determination of provisional tariff in Case No. 91 of 2013, it
had requested the Commission to allow relaxation in auxiliary consumption mainly
because of the RO plant, which is a new system to be installed to comply with the
MoEF directions of achieving zero effluent discharge, and additional water pumping
system. In its Order in that Case, the Commission has considered the additional
0.13% auxiliary consumption and had directed VIPL to submit details of the actual
monthly auxiliary power consumption of the RO plant and additional water pumping
system separately.
4.13.3. VIPL submitted that the additional water pumping system has been put to use from 1
April, 2014. The RO system is at an advanced stage, and is likely to be
commissioned in the next few months. In the absence of actual additional
consumption pattern for these systems for a considerable stable operating period,
VIPL requested the Commission to consider the normative auxiliary consumption of
9% in the interim.
4.13.4. In its provisional tariff Order dated 17 January, 2014 in Case No. 91 of 2013, the
Commission considered additional 0.13% auxiliary consumption for the RO plant,
and directed VIPL to maintain monthly auxiliary power consumption data with
details of auxiliary power consumption for the RO plant and additional water
pumping system separately. The Commission notes that the RO plant has not yet
been commissioned. In absence of actual additional consumption pattern for these
systems for a considerable stable operating period of the generating station, the
Page 82 of 99
Commission approves the normative auxiliary consumption of 9% for FY 2014-15

and FY 2015-16.
4.13.5. The Commission directs VIPL to maintain monthly auxiliary power
consumption data for the plant, with separate details of auxiliary power
consumption for the RO plant and additional water pumping system, and to
submit them to the Commission at the time of truing up.
4.13.6. The Commission will take a view in the matter at that time based on analysis of
actual auxiliary consumption so as to arrive at actual auxiliary power consumption
for the RO plant and additional water pumping system over and above the normative
auxiliary consumption.
Station Heat Rate (SHR)
4.13.7. VIPL submitted that the Commission, in its Order in Case No. 91 of 2013,
considered the Design SHR as per the provisions of MERC MYT Regulations, 2011,
and directed it to submit the Performance Guarantee (PG) test reports. VIPL has
considered SHR of 2401 kcal/kWh, as approved in the provisional Tariff Order, for
the interim period.
4.13.8. VIPL submitted that Unit 2 has recently been commissioned in March, 2014, and that
it is in the process of stabilising the overall operations of the station. The PG test
would be taken up subsequently. Accordingly, VIPL has considered SHR of 2401
kcal/kWh approved in the provisional Tariff Order in the meantime. VIPL will
submit the PG test results and would approach the Commission for relaxation in the
SHR norm based on them at the time of final true-up in the subsequent Tariff filing.
4.13.9. The Commission directed VIPL to submit the actual Plant Load Factor (PLF), SHR,
specific oil consumption and auxiliary consumption for Unit 1 from the date of COD
till FY 2013-14. VIPL submitted that the higher SHR and Auxiliary consumption for
Page 83 of 99
Unit 1 is because of the Unit running in part load due to partial availability of sales
contract/stabilisation period. The Commission notes the following operational
parameters for Unit 1:
Table 49 - Operational Parameters for Unit 1 from COD till FY 2013-14

Auxiliary
FY 2013-14
PLF (%)
Station Heat
Specific Oil
Consumption Rate
Consumption
(%)
(ml/kWh)
(kcal/kWh)
Apr-2013
33.04
11.32
2588
13.1
May-2013
56.86
10.36
2479
3.11
Jun-2013
39.95
12.16
2594
4.15
Jul-2013
11.1
13.92
2582
18.23
Aug-2013
8.04
13.59
2675
18.6
Sep-2013
59.96
11.51
2582
2.8
Oct-2013
1.94
11.06
2588
1.63
4.13.10. The Commission has considered the gross generation as submitted by VIPL, worked
out with PLF of 85% as per MYT Regulations, 2011.
4.13.11. As regards the SHR, the Commission observes that VIPL has mentioned the
Guaranteed Performance Parameters, i.e., Turbine Heat Rate, Boiler Efficiency and
Turbine Cycle Heat Rate. The Commission sought supporting documents, which
were submitted by VIPL.
4.13.12. Subsequently, the Commission asked VIPL to submit the PG test report of all the
parameters. VIPL submitted that, in wake of consistent energy demand of RInfra-D
during the election periods as well in past months, the PG Test has finally commenced
from 27 September, 2014. The Test is ongoing and the details would be submitted
upon completion for prudence check. The Commission notes that, in the provisional
Tariff Order, it has computed the allowable SHR in accordance with the Regulation
44.3, as shown in Table 50 below:
Page 84 of 99
Table 50 - Station Heat Rate allowed by the Commission

Sr.
Particulars
Value
Pressure rating (As submitted by VIPL)
170 kg/cm2
SHT/RHT (As submitted by VIPL)
538 0C /538 0C
Type of Boiler Feed Pump (As submitted by VIPL)
Motor driven
No.
4
5
Guaranteed Turbine Cycle Heat Rate (As submitted by

VIPL)
Guaranteed Boiler Efficiency (As submitted by VIPL)
Design Unit Heat Rate = Guaranteed Turbine Cycle Heat
Rate/Guaranteed Boiler Efficiency (As submitted by

VIPL)
Maximum Design Unit Heat Rate as per MERC MYT

Regulations, 2011( for Motor Driven BFP)
1988.4 kcal/kWh
86.2%
2306.73
kcal/kWh
2254 kcal/kWh
Allowable Design Unit Heat Rate (minimum of 6 and 7)
2254 kcal/kWh
Allowable SHR=1.065 x Design Unit Heat Rate
2401 kcal/kWh
4.13.13. The Commission notes that VIPL has not completed the PG Test yet. In its absence,
the Commission has considered the design SHR of 2401 kCal/kWh as per the
provisions of the Regulations.
4.13.14. With regard to relaxation in the SHR, the Commission, in its provisional Tariff Order
dated 17 January, 2014 in Case No. 91 of 2013, had held as under:
4.6.58 As regards the coal quality problem, the Commission had adequately
dealt with this issue in the Tariff Orders of other Generating Companies. The
Commission reiterates that in light of the Judgment of Honble ATE dated 19
April, 2012 in Review Petition No. 9 of 2011 in Appeal No. 199 of 2010,
quality of coal is not totally beyond the control of the Generating Company
and does not qualify for relaxation of operational parameters from the norms,
in general. Further, the norms of operational parameters specified by the
Commission adequately address the effect of monsoon. The relevant extract of
the aforesaid ATE Judgement is reproduced below:
Page 85 of 99
We do not accept that the quality of coal is totally beyond the control of the
appellant. If the quality of raw coal supplied by the coal companies is poor,
the appellant has to make arrangements for washing of coal and blending with
superior quality of coal.
4.6.59 The Commission has gone through the submissions of VIPL regarding
the variation in SHR from the design SHR. The Commission has specified the
norms of operation after giving due consideration to the design parameters of
the equipment being manufactured and the prevailing operating conditions.
Further, as submitted by the Petitioner, the performance guarantee tests are
yet to be carried out. The Commission, at this stage, in the absence of
performance guarantee tests has considered the Design SHR as per the
provisions of MERC MYT Regulations, 2011. The Commission will further
take a view in the matter based on the performance guarantee test reports.
The Commission directs VIPL to submit the performance guarantee test
reports after completion of the same.
4.13.15. The Commission has considered the Station Heat Rate as 2401 kCal/kWh for
FY 2014-15 and FY 2015-16 as per Regulation 44.3 of the MERC MYT
Regulations, 2011. The Commission directs VIPL to submit the PG Test reports
after completion. The Commission will take a final view in the matter based on
the reports.
4.13.16. The performance parameters approved by the Commission are shown in Table 51
below:
Table 51 Operational Parameters approved by the Commission
Particulars
Units
FY 2014-15
No. of days
Nos.
365
366
Installed Capacity
MW
600
600
Availability
85%
85%
Plant Load Factor
85%
85%
Gross Generation
MU
4,468
4,480
9.00%
9.00%
MU
4,066
4,077
kCal/kWh
2,401
2,401
ml/kWh
1.00
1.00
0.80
0.80
Net Generation
Station Heat Rate
Specific Oil Consumption
Transit loss
FY 2015-16
Page 86 of 99
4.14. Energy Charges

4.14.1. VIPL submitted Annual Energy Charges as follows:
Table 52 - Annual Energy Charges, as submitted by VIPL (Rs. Crore)
Particulars
FY 2014-15
FY 2015-16
Annual Energy Charges
777.02
778.59
4.14.2. The Commission has considered the consumption of Furnace Oil (FO) and Light
Diesel Oil (LDO) in the same proportion as submitted by VIPL. The consumption of
domestic coal and imported coal has also been considered in the same proportion as
submitted by VIPL. Accordingly, the fuel cost as approved by the Commission for
FY 2014-15 and FY 2015-16 is shown in Table 53 below:
Table 53 - Fuel Cost as approved by the Commission (Rs. Crore)
Particulars
FY 2014-15
Fuel Cost
FY 2015-16
754.88
756.45
4.14.3. The Commission asked for the reasons for considering the cost of water of Rs. 22.14
Crore for FY 2014-15 and FY 2015-16. VIPL submitted that the water requirement
for the plant has been met through MIDC and Irrigation Department at different rates
prescribed by them. VIPL submitted the computation of cost of water as under:
Table 54 Cost of Water as submitted by VIPL (Rs. Crore)
Particulars
FY 2014-15
FY 2015-16
Cost of Irrigation Deptt. Water

Water requirement (m3)
80,30,000
80,30,000
Water Charges (Rs./ m3)
3.20
3.20
Gram Panchayat tax (@20% base rate)(Rs./m3)
0.64
0.64
Total Irrigation Deptt. Water Cost (Rs. Crore)
3.08
3.08
Page 87 of 99
Particulars
FY 2014-15
FY 2015-16
Cost of MIDC Water

Water requirement (m3)
80,30,000
80,30,000
22
22
Water Charges (Rs./ m3) for balance 7 MLD
25.50
25.50
Water charges (Rs. Crore) for use of 22 MLD
18.56
18.56
0.50
0.50
Total MIDC Water Cost (Rs. Crore)
19.06
19.06
Cost of Water (Rs. Crore)
22.14
22.14
Water Charges (Rs./ m3) for first 15 MLD
Fire service and service charges (Rs. Crore)
4.14.4. As regards the allocation of MIDC water, the Commission notes that MIDC, vide
letter No. DE/E&M/D74628/of 2013 dated 6 December, 2013, intimated VIPL
regarding revision in the economical water rate to Rs. 22/m3 for first 15 MLD and
Rs. 25.50/m3 for balance 7 MLD of water to VIPL.
4.14.5. Accordingly, the Commission has considered the water cost of Rs. 22.14 Crore as
submitted by VIPL for FY 2014-15 and FY 2015-16. The Energy Charges, as
approved by the Commission for FY 2014-15 and FY 2015-16, are given in Table 55
below:
Table 55 - Energy Charges as approved by the Commission
Sr. No.
Particulars
Fuel Cost (Rs. Crore)
Cost of water (Rs. Crore)
Total Energy Charges (1+2) (Rs. Crore)
Energy charges (Rs./kWh)
FY 2014-15
FY 2015-16
754.88
756.45
22.14
22.14
777.02
778.59
1.91
1.91
Page 88 of 99
4.15. Summary of Tariff

4.15.1. The Tariff approved by the Commission for FY 2014-15 and FY 2015-16 is shown in
Table 56 below:
Table 56 - Tariff approved by the Commission for FY 2014-15 and FY 2015-16
Particulars
Annual Fixed Charges (Rs. Crore)
Energy charges (Rs./kWh)
FY 2014-15
FY 2015-16
814.91
907.47
1.91
1.91
4.15.2. The Commission approves Annual Fixed Charges of Rs. 814.91 Crore for FY
2014-15 and Rs. 907.47 Crore for FY 2015-16, and Energy Charges of Rs. 1.91
/kWh for both these years.
4.15.3. As per Regulation 49.8 of the MYT Regulations, 2011, VIPL shall be eligible for an
incentive of 25 Paise/kWh for actual generation in excess of ex-bus energy
corresponding to target PLF.
Page 89 of 99
5.
COMPLIANCE OF DIRECTIVES
The Commission issued certain directives to VIPL in its Order dated 24 January,
2014 in Case No. 91 of 2013. These directives and their compliance is summarised
below:
5.1.
Risk of FERV
Directive
5.1.1.
The Commission directed VIPL to study options to protect the risk arising from
FERV in future period after COD and the cost of doing so, along with possible tariff
impact, and submit the same to it.
Response
5.1.2.
VIPL has received quotations from various banks on the hedging rates. Based on the
same, alternative options have been framed and submitted for consideration of the
Commission.
5.1.3.
The Commission notes that the present Regulations do not provide treatment of
FERV/Hedging cost for the period after COD of the Project. The Commission will
deal with the issue of treatment of FERV/hedging cost for the period post COD in the
separate Petition filed by VIPL.
5.2.
Fuel Supply Agreement

Directive
5.2.1.
The Commission directed VIPL to expedite the process of executing FSA so as to

ensure availability of linkage coal by the date of commencement of supply under
regulated business from 1 April, 2014, and to submit the signed FSA for the project
along with the final Triff application.
Page 90 of 99
Response
5.2.2.
VIPL submitted that FSA for Unit 2 has been signed on 10 March 2014, and has been
submitted to the Commission vide letter dated 26 March, 2014. For Unit 1, SLC (LT)
has granted approval for its conversion from GCPP to IPP. Subsequently, VIPL has
complied with the requirements of WCL for signing of FSA and is awaiting the
response of WCL/ CIL for its execution, which is expected shortly.
5.2.3.
The Commission notes that VIPL has signed FSA for ensuring the supply of coal for
Unit 2. The Commission directs VIPL to make efforts to expedite the execution of
FSA for Unit 1 and submit the signed FSA to the Commission during its next Tariff
Petition.
5.3.
Performance Guarantee Test

Directive
5.3.1.
The Commission directed VIPL to submit the PG Test report after its completion.
Response
5.3.2.
VIPL has recently commissioned the Project on 28 March, 2014 and the Units are
currently under stabilization. Accordingly, VIPL has planned the PG Tests in July
and October, 2014 for Units 1 and 2 respectively in synchronisation with planned
outages to minimize the plant down-time and avoid loss of generation. Subsequent to
the conduct of PG Tests, VIPL shall submit the test results to the Commission.
5.3.3.
The Commission notes that the PG Test is under process and yet to be completed.
The Commission directs VIPL to submit the reports after completion during the next
Tariff filing.
5.4.
Directive
Page 91 of 99
5.4.1.
The Commission directed VIPL to maintain monthly auxiliary consumption for plant
with details of auxiliary power consumption for RO plant and additional water
pumping system separately, and submit the same to the Commission.
Response
5.4.2.
VIPL has operationalized the water pumping system in line with the COD of the
station. The RO plant is at an advanced stage of completion. VIPL will record the
actual auxiliary consumption for these systems for a few months so that the data can
serve as a representative sample. VIPL has accordingly not requested for additional
consumption against such systems in the current Petition, and would submit the
actual consumption for consideration at the time of final true-up.
5.4.3.
The Commission notes that the RO plant is proposed to be commissioned later in FY

2014-15. Accordingly, it has not considered the additional consumption of the RO
plant while approving the auxiliary consumption. The Commission re-iterates its
directives to VIPL to maintain monthly auxiliary power consumption for the plant
with details of auxiliary power consumption for RO plant and additional water
pumping system separately, and submit them to the Commission in the next Tariff
filing.
Page 92 of 99
6.
APPLICABILITY OF ORDER AND TARIFF
This Order on VIPLs Petition for approval of the capital cost and determination of Tariff of
VIPLs generating station for the period from FY 2014-15 to FY 2015-16 shall come into
force with effect from the date of its issuance, and shall continue to be in force for the rest of
the Control Period till 31 March, 2016.
As eleven months of FY 2014-15 are already over, the Commission allows VIPL to
recover/adjust the difference in revenue recoverable, if any, in accordance with the Tariff
approved in this Order vis-a-vis the Tariff charged during the first 11 months of FY 2014-15,
i.e., April, 2014 to February, 2015 in twelve equal monthly instalments from March, 2015
onwards.
Page 93 of 99
7.
RULINGS OF THE COMMISSION
(i)
The Commission observes that the delay in Commissioning of Unit 1 cannot be

categorized either fully controllable or uncontrollable. In light of the forgoing,
the Commission, for approving the project cost, has considered equal sharing of
impact of delay of Unit 1 on overheads, IDC and FERV (i.e. difference between
the actual cost for Unit 1 and estimated cost for Unit 1 considering COD as per
MYT norms) between VIPL and consumers. The Commission has considered the
actual cost of Unit 2, treating delay in the commissioning of Unit 2 as
uncontrollable.
(ii)
The Commission observes that the cost of initial spares capitalised till COD is
within 2.5% of Project cost as approved in this Order, as stipulated in
Regulation 27.7 of the MERC MYT Regulations, 2011. Accordingly, the
Commission has allowed the actual cost of initial spares amounting to Rs 22.34
Crore as on COD, being within the ceiling specified in the Regulations.
(iii)
The Commission, after analysis and approval of cost of land, BTG, BOP, taxes
and duties, initial spares, OSBL, overheads, IDC and FERV set out at paras. 3.3
to 3.9, the Commission approves the capital cost of Rs. 3940.10 Crore as against
VIPLs claim of Rs. 4005.15 Crore.
(iv)
The Commission approves the debt:equity ratio of 70.4:29.6 considering the

actual equity, in accordance with Regulation 30.1 of MERC MYT Regulations,
2011.
(v)
The Commission has considered the Project cost of Rs. 3940.15 Crore, including
the capitalisation of Rs. 5 Lakh during the period from COD till 31 March, 2014.
For the purpose of determination of tariff for FY 2014-15, the Commission
approves the capital cost of Rs. 3859.94 Crore, after deducting the depreciation
of Rs. 80.21 Crore from COD till 31 March, 2014, based on the average
Page 94 of 99
depreciation rate of the assets capitalised corresponding to Unit 1 and Unit 2,

from the Project cost as on 31 March, 2014.
(vi)
The Commission approves the additional capitalisation of Rs. 510.40 Crore on a

provisional basis for the Railway siding, RO Plant and other BTG spares in
accordance with Regulation 28.1 of the MERC MYT Regulations, 2011. The
Commission will accord final approval at the time of truing up of FY 2014-15,
subject to prudence check.
(vii)
The Commission observes that the railway siding is for dedicated use of VIPL for
the operation of the generating station. The capital cost of the railway siding has
been approved by the Commission as additional capitalisation for FY 2014-15 on
provisional basis. The Commission directs VIPL to inform the Commission in
case of sharing of railway siding with other users in future.
(viii) The Commission approves the depreciation on opening GFA for full operational
period, and on additional capitalisation considering the average of opening and
closing value of assets based on the rates of depreciation for various classes of
assets as per the MERC MYT Regulations, 2011. Accordingly,the Commission
has approved depreciation of Rs. 205.66 Crore for FY 2014-15 and Rs. 215.04
Crore for FY 2015-16.
(ix)
The Commission approves Interest on long term loan capital of Rs. 269.25 Crore
for FY 2014-15 and Rs. 319.87 Crore for FY 2015-16, in accordance with the
Regulation 33 of MERC MYT Regulations, 2011.
(x)
The Commission observes that VIPL has not completed the Project within the
timeline specified in AnnexureIII of MERC MYT Regulations, 2011, i.e., 33
months for first Unit, and within an interval of 4 months for the Second Unit.
The Regulations specify that, if the project is not completed within the time line
for whatever reasons, no additional return shall be admissible. Accordingly, the
Commission rules that additional RoE, as claimed by VIPL, is admissible. The
Page 95 of 99
Commission approves the RoE of Rs. 179.49 Crore for FY 2014-15 and Rs.
202.89 Crore for FY 2015-16, at the rate of 15.5% specified in the Regulation on
the opening equity capital.
(xi)
The Commission observes that no Income Tax has been paid for previous
financial year. The Commission has not approved the provisional Income Tax
payable by VIPL for FY 2014-15 and FY 2015-16, as per Regulation 34.1 of
MERC MYT Regulations, 2011.
(xii)
The Commission approves the O&M expenses of Rs. 105 Crore for FY 2014-15
and Rs. 111 Crore for FY 2015-16 taking into account the norms for generating
sets of 250MW capacity specified in Regulation 46 of the MERC MYT
Regulations, 2011 in the absence of norms for 300 MW Capacity sets.
(xiii) The Commission observes that VIPL has not considered any Non-tariff income
as the project has commenced operations only recently. The Commission directs
VIPL to submit details of Non-tariff Income, if any, for FY 2014-15 & FY 201516 at the time of truing up for those years.
(xiv)
The Commission approves Interest on Working Capital amounting to Rs. 55.52

Crore for FY 2014-15 and Rs. 58.68 Crore for FY 2015-16 in accordance with the
Regulation 35.1 of MERC MYT Regulations, 2011.
(xv)
The Commission observes that VIPL has signed Fuel Supply Agreement on 10
March, 2014 for supply of coal to Unit 2. However, the FSA for Unit 1 has not yet
been signed. The Commission directs VIPL to continue efforts to expedite the
execution of the FSA so as to ensure the availability of linkage coal for Unit 1.
(xvi)
The Commission directs VIPL to maintain monthly auxiliary power

consumption data for the plant, with details of auxiliary power consumption for
the RO plant and additional water pumping system, and to submit them to the
Commission at the time of truing up.
Page 96 of 99
(xvii) The Commission has considered Station Heat Rate of 2401 kcal/kWh for FY
2014-15 and FY 2015-16 as per Regulation 44.3 of the MERC MYT Regulations,
2011. The Commission directs VIPL to submit the PG Test reports after
completion. The Commission will take a final view in the matter based on the
reports.
(xviii) The Commission approves Annual Fixed Charges of Rs. 814.91 Crore for FY
2014-15 and Rs. 907.47 Crore for FY 2015-16, and Energy Charges of Rs. 1.91
/kWh for both these years.
The Petition of VIPL in Case No. 115 of 2014 stands disposed of accordingly.
Sd/(Deepak Lad)
Member
Sd/(Azeez M. Khan)
Member
Sd/(Chandra Iyengar)
Chairperson
Page 97 of 99
Appendix-I
List of persons who attended the TVS on 19 June, 2014 at 12.30 hrs
Sr. No.
Name
1.
Shri Shrikant M. Nene
VIPL
2.
Shri Vibhav Agrawal
VIPL
3.
Shri Madhav Tekawade
VIPL
4.
Shri Vijay Chaudhary
VIPL
5.
Shri Ramandeep Singh
Deloitte
6.
Shri Vinaykumar Patel
Deloitte
7.
Shri Kapil Sharma
R-Infra
8.
Shri Kishor Patil
R-Infra
9.
Shri Vivek Mishra
R-Infra
10.
Shri Himanshu Mishra
R-Infra
Company / Institution
Page 98 of 99
Appendix-II
List of persons who attended the Public Hearing on 9 December, 2014 at 12.00 hrs
Sr.no
Name of Person
Company/Institution
Shri Shrikant Nene
VIPL
Shri Vibhav Agarwal
VIPL
Shri Kapil Sharma
R-Infra
Shri Ramandeep Singh
Deloitte
Shri Manoj Pongde
VIPL
Shri Kishor Patil
R-Infra
Shri Himanshu Agarwal
VIPL
Shri Shantanu
VIPL
Shri Abaji Naralkar
R-Infra
Page 99 of 99

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Before the

MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

MERC Order Case No. 115 of 2014

BACKGROUND OF THE CASE ....................................................................................... 9

ADMISSION OF THE PETITION AND PUBLIC PROCESS ................................................. 10

ORGANISATION OF THE ORDER ................................................................................. 11

PUBLIC HEARING ...................................................................................................... 12

PUBLIC HEARING AND SUGGESTIONS/OBJECTIONS FROM THE PUBLIC/STAKEHOLDERS

APPROVAL OF CAPITAL COST .............................................................................. 13

PROJECT COMMISSIONING AND TIME-LINES.............................................................. 13

SUBMISSION OF VIPL ON CAPITAL COST .................................................................. 29

EPC CONTRACT ........................................................................................................ 35

INITIAL SPARES AS PART OF THE CAPITAL COST AS ON COD .................................... 39

OUTSIDE BOUNDARY LIMITS (OSBL) ....................................................................... 40

INTEREST DURING CONSTRUCTION (IDC) ................................................................. 44

FOREIGN EXCHANGE RATE VARIATION .................................................................... 48

APPROVED CAPITAL COST ........................................................................................ 50

MEANS OF FINANCE .................................................................................................. 51

DETERMINATION OF TARIFF FOR FY 2014-15 AND 2015-16 .......................... 53

CAPITAL COST FOR DETERMINATION OF TARIFF ........................................................ 53

ADDITIONAL CAPITALISATION .................................................................................. 55

INTEREST ON LONG TERM LOAN ............................................................................... 61

RETURN ON EQUITY .................................................................................................. 66

INCOME TAX ............................................................................................................. 69

OPERATION AND MAINTENANCE (O&M) EXPENSES ................................................. 71

NON- TARIFF INCOME................................................................................................ 73

MERC Order Case No. 115 of 2014

INTEREST ON WORKING CAPITAL ............................................................................. 73

ANNUAL FIXED CHARGES ......................................................................................... 75

FUEL SUPPLY AGREEMENT ....................................................................................... 77

CALORIFIC VALUE AND PRICE OF FUEL .................................................................... 79

ENERGY CHARGES .................................................................................................... 87

SUMMARY OF TARIFF ................................................................................................ 89

COMPLIANCE OF DIRECTIVES ............................................................................. 90

RISK OF FERV .......................................................................................................... 90

FUEL SUPPLY AGREEMENT ....................................................................................... 90

PERFORMANCE GUARANTEE TEST ............................................................................ 91

AUXILIARY CONSUMPTION ....................................................................................... 91

APPLICABILITY OF ORDER AND TARIFF .......................................................... 93

RULINGS OF THE COMMISSION ........................................................................... 94

MERC Order Case No. 115 of 2014

TABLE 6 - UNIT-WISE ACTUAL PROJECT COST AS ON COD, AS SUBMITTED BY VIPL (RS.

TABLE 7 - PROJECT COST AS ON COD, AS SUBMITTED BY VIPL (RS. CRORE)........................... 29

MERC Order Case No. 115 of 2014

TABLE 29 DEPRECIATION, AS SUBMITTED BY VIPL (RS. CRORE) .......................................... 60

MERC Order Case No. 115 of 2014

Annual Contracted Quantity

Circulating Fluidised Bed Circulation

Expert Advisory Committee

MERC Order Case No. 115 of 2014

Minimum Alternate Tax

Ministry of Petroleum and Natural Gas

MERC Order Case No. 115 of 2014

Non Tariff Income

Parts per million

State Bank Advance Rate

United States Dollar

MERC Order Case No. 115 of 2014

Background of the Case

VIPL is a Generating Company which has developed a 600 MW (2 x 300 MW)

VIPLs prayers are as under:

(a) Admit the present Petition;

MERC Order Case No. 115 of 2014

(c) Approve the performance parameters as submitted in this petition.